First, I'm no professional with PS CS6. Do not have Illustrator. I have this logo, red circle w/white letters and superscript 2. It's going to be printed on light gray fabric. I assume that I need to make transparent canvas and transparent letters (lu) so that it takes the gray color of the fabric and not the white background and letters of my file but when I rasterize type, save and open it again I cannot edit. Also, what's the best save format? Thank you very much for your help!
There are several formats, that support Transparency, such as PSD, and PNG.
The decision will probably be made by the fabric printing software. Can it take PSD? If so, that would be my first choice.
If not, then can it accept PNG?
With your logo, GIF (which supports Transparency), should work too, if the printing software will support that.
Some formats, like JPEG, will NOT support Transparency, so are of no use.
Just make sure to Save_As PSD w/ all Layers intact, for later editing.