Ok, this is a result of some trial and error, but I thought it was pretty cool, and put together some step by step instructions to show you what I learned.
I have these Instagram overlays, and thought, surely I can use these on my iPhone, somehow? (Meaning, I'd like to save the PNG images to my phone to use on Instagram photos whenever I'd like). I knew iPhone supports PNG format, because when you take a screenshot it saves as a PNG. Some research told me you can layer images using an app called Pictwo. (It's not free but it is only 99 cents). I believe this particular app will only crop square images (great for Instagram).
When I say this is a result of trial & error, there are quite a few apps that will layer images, but they all have some quirks. Some don't support PNG, and some are more difficult to use. Pictwo was the easiest and least expensive way I found to use the overlays through the iPhone.
These overlays come colored, so for testing purposes, I just used the Monday one as it comes. Here's how to use it.
1) Download Pictwo.
2) Email your overlay file to yourself in PNG format, open the email on your iPhone, and save to your camera roll. The Monday Instagram overlay I used looks like this, a black background with your overlay showing (provided your overlay isn't black - stay tuned for tips on changing the color of an overlay).
3) Open Pictwo, and select your base image (the image you want to put the overlay on). I used a photo I'd shared previously on Instagram for this example. It's already cropped square.
4) Now tap again to select your overlay image.
5) Next, follow the instructions on the screen to line up the overlay and original photo as you like, then hit the right arrow.
6) Apply the "normal" style blend mode. (Or, if you like one of the other choices better, select it).
7) Change opacity of the overlay using the slider as you like, then click the right arrow again to proceed to save to your camera roll. You can also open it right up in Instagram from the Pictwo app.
That's all there is to it.
Now, say you want to change the color of these overlays. The best and easiest way to do this is to use Photoshop Elements (or Photoshop) if you have it, before you email the files to yourself. You can do this using my tutorial here. You can also do this in a free Photoshop-style program called GIMP. I haven't used GIMP in quite some time, but I do recall it works very similar to Photoshop, so you should be able to select and fill your overlay.
If you want to try it, you can recolor them on your phone, but I haven't found a free way to do this. (I tried a bunch of apps). I used Laminar (formerly Iris Photo Suite). (Note: you MAY need "Laminar Pro" - Because I had Iris Photo Suite and it automatically converted, I'm not sure which version I have or whether the base Laminar app can do this). Anyway, here's how to change the color of one of these overlays in Laminar. You might also be able to do this in the new Photoshop Touch app, but I can't run this on my iPhone 4 (I will definitely be downloading it once I upgrade to the iPhone 5).
1) Open your overlay image in Laminar.
2) Click the top left icon to create a layer mask.
3) Just hit "apply" on this screen. I didn't mess with the settings on this one.
4) Now when you click on "layers" at the bottom of the screen, the left hand side with slide out and you should see your overlay under the mask area.
5) Click on "edit." Then click "brushes."
6) Now click "paint."
7) On this screen, you can click on brushes to change the brush size, and click on the foreground color to change to the color you want your overlay to be.
8) Start painting over the overlay.
9) When you've covered your overlay, hit apply.
10) This is the result.
11) To save, click on the cloud in the upper right corner. Be sure to choose "png" for the output format. This is key to making sure the overlay saves with the transparency.
Now it will be in your camera roll and you can use it just like you did with the original version.
I think this is a fun way to use overlays for sharing directly from your iPhone. It definitely gives me more options for using them! I hope you enjoyed these tutorials. Let me know if you give it a try.