Light bends when passing through an object. This effect is called refraction. To create refraction on an object (such as a sphere), you must have another object (such as a cube) relatively close behind the refracted object. For example, select the sphere object.
To create the refracted surface, begin by creating a Refract node (found in the Node under Lighting>Ray Trace) and attach it to the root node's Refraction_Color input. To best achieve this effect, you might want to set the Refract node's Background input to use the same color (or texture) as the scene's background (click the Background input's color then drag over your scene to select a color). The sphere's Diffuse_Color and Specular_Color should both be dark gray to black.
You can set the index (amount) of refraction to real world values. For example:
Please refer to an index of refraction chart for best results.
You must enable ray tracing in the Render Options window in order to use ray-traced refractions.
NOTE: You do not need to add transparency in order to obtain refraction as these are two seperate effects. In fact, you will usually get the refraction effect you want by keeping transparency at 0.