Why doesn't the Delete key delete anymore

Question

The previous version of Photoshop I used was CS4 and in CS4, whenever I selected a portion of an image with the magic wand and hit delete, it simply deleted that portion of the image (rendering it transparent). Easy!

In CS6, this is not the case. Now when I select a portion of an image and hit Delete, it brings up the Fill dialogue.

For example I have this picture (it's a Vauxhall Corsa):

I want to use the magic wand to render anything that isn't a Corsa transparent, so I start by highlighting some clouds with the magic wand like so:

And now I hit delete, but instead of that area of the picture now being transparent as I would expect based on my experience with CS4, I get this dialogue:

Some questions:

1. Can this dialogue be used to achieve the functionality I want?
2. If so how?
3. If now, how do I achieve the functionality I want in CS6?

Answer 1

I'm going to assume the layer is the background layer and/or locked. Try at+double clicking on the layer thumbnail.