Opacity of div's background without affecting contained element in IE 8?

The opacity style affects the whole element and everything within it. The correct answer to this is to use an rgba background colour instead.

The CSS is fairly simple:

.myelement {
    background: rgba(200, 54, 54, 0.5);
}

...where the first three numbers are the red, green and blue values for your background colour, and the fourth is the 'alpha' channel value, which works the same way as the opacity value.

See this page for more info: http://css-tricks.com/rgba-browser-support/

The down-side, is that this doesn't work in IE8 or lower. The page I linked above also lists a few other browsers it doesn't work in, but they're all very old by now; all browsers in current use except IE6/7/8 will work with rgba colours.

The good news is that you can force IE to work with this as well, using a hack called CSS3Pie. CSS3Pie adds a number of modern CSS3 features to older versions of IE, including rgba background colours.

To use CSS3Pie for backgrounds, you need to add a specific -pie-background declaration to your CSS, as well as the PIE behavior style, so your stylesheet would end up looking like this:

.myelement {
    background: rgba(200, 54, 54, 0.5);
    -pie-background:  rgba(200, 54, 54, 0.5);
    behavior: url(PIE.htc);
}

Hope that helps.

[EDIT]

For what it's worth, as others have mentioned, you can use IE's filter style, with the gradient keyword. The CSS3Pie solution does actually use this same technique behind the scenes, but removes the need for you to mess around directly with IE's filters, so your stylesheets are much cleaner. (it also adds a whole bunch of other nice features too, but that's not relevant to this discussion)

it's simple only you have do is to give

background: rgba(0,0,0,0.3)

& for IE use this filter

background: transparent;
zoom: 1;    
filter: progid:DXImageTransform.Microsoft.gradient(startColorstr=#4C000000,endColorstr=#4C000000); /* IE 6 & 7 */
-ms-filter: "progid:DXImageTransform.Microsoft.gradient(startColorstr=#4C000000,endColorstr=#4C000000)"; /* IE8 */

you can generate your rgba filter from here http://kimili.com/journal/rgba-hsla-css-generator-for-internet-explorer/

opacity on parent element sets it for the whole sub DOM tree

You can't really set opacity for certain element that wouldn't cascade to descendants as well. That's not how CSS opacity works I'm afraid.

What you can do is to have two sibling elements in one container and set transparent one's positioning:

<div id="container">
    <div id="transparent"></div>
    <div id="content"></div>
</div>

then you have to set transparent position: absolute/relative so its content sibling will be rendered over it.

rgba can do background transparency of coloured backgrounds

rgba colour setting on element's background-color will of course work, but it will limit you to only use colour as background. No images I'm afraid. You can of course use CSS3 gradients though if you provide gradient stop colours in rgba. That works as well.

But be advised that rgba may not be supported by your required browsers.

Alert-free modal dialog functionality

But if you're after some kind of masking the whole page, this is usually done by adding a separate div with this set of styles:

position: fixed;
width: 100%;
height: 100%;
z-index: 1000; /* some high enough value so it will render on top */
opacity: .5;
filter: alpha(opacity=50);

Then when you display the content it should have a higher z-index. But these two elements are not related in terms of siblings or anything. They're just displayed as they should be. One over the other.