After you have sized your image and canvas, you are ready to save a Gif. Under File, select Save for Web. In the Save for Web dialog box, you can select 4-up to see four examples of what your image would look like at various settings.
Because we are going to use GifBuilder (a Macintosh share-ware program) for our animation, our images must be Gifs. Normally we would save a graphic image, like the original letter, as a Gif and an illustration or color image (such as your final image) as a jpeg. To learn more about saving images in various formats, click here. But for now, save all your images as Gifs. Select the fewest number of colors possible without degrading your images. (Obviously four colors might be enough for your letter, but you may need 32 or 64 for your final illustration.) Try to keep your image size below 28k--the smaller the better.
The image with the black box is the one selected. Be sure to save all your Gifs in the same folder.