Yes they do,
"An alpha channel (for transparency) may be stored in a separate file, where it is similar to a grayscale image, or in a fourth channel that converts 24-bit images to 32 bits per pixel." -Wiki
And that's what Photoshop allows, yet it doesn't allow alpha channels in PNG files.
Edit: Actually it allows you to export PNGs for Web with transparency, if you have a transparent background, but that's not the same at all. I'm using CS2, so I can't say if it changed in CS3...