How does the "Remove background" feature work?

Enable Media Replace includes a very useful function from version 4.0: Remove Background.

What does the Remove Background function do? 

The image is sent to our API and then returned with a transparent background (for PNG images) or with a white background (for JPG images). Then your old image will be overwritten with the new image, just like the Replace Media function.

If you don't want to "remove" the background with a white/transparent color, you can also select a solid color background from a color picker.

Where can you find the Remove Background option? 

You can find it in the same two places as the Replace Media option.

Either In the Media Library, next to the good old Replace Media link...

...or in the Edit Media screen.