What am I missing!?

There’s a tutorial here that describes the differences between the types of images and what you can do with them that might help.

Basically, you’ll need to create a cutting shape using a vector Drawing program (like Inkscape or Illustrator).

We’ve got a lot of tutorials on getting started with them if you’ve never used one, and some handy tutorials for using the Glowforge interface as well. (Those are linked in the Matrix that @anticzcom linked above.)

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