- Open image
- Right click the layer and Add Alpha Channel
- Get the Tools->Selection->Free Select lasso tool and click round the edge (just inside) of the object.
- Select->Feather (and an amount for feathering)
- Select->Invert (causes the background to be selected)
For a hard edged outline, instead of feathering the outline can be clicked round using the Select->Scissors tool and carefully clicking all round adding/moving the points as required.