Eraser has turned into a "paint" tool

I've been using X3 for a couple of years.  I often cut-out a portion of an image (jpeg usually) then use the eraser tool to remove unwanted portions of the object.  Until recently the "erased" portion of the object was transparent, i.e., the background image would show through.  Now the earaser "paints" the object with the either the background or foreground color (or white) none of which are transparent.  I do not know what I changed to cause this.  Nothing in the eraser tool properties appears to address this issue.  [Help (eraser)recommends "changing settings on the properties bar."]  Any insight would be appreciated.

rick