Color Difference Keying
or Blue Screen Extraction

Here's a file I found.  You can right-click it to save it so you can do these steps yourself.

Magic Carpet blue screen

1)    Open After Effects

Empty project in AE

2)    Add the image to the project
The easiest way is to drag the file to the Project tab -- the icon for the file appears -- then drag this icon to the Timeline below.
Here is where to drag the file, then the icon

A new composition icon appears in the Project tab and the file appears in the view window.
Here is project with the file added and composition created

3)    Now extract a key from the blue screen
Choose Effect->Keying->Color Difference Key.
This is where the menu item is located

Where the Project tab was, the controls for the Color Difference Key tool now appear.
You can now access the controls

First, change the view to show all parts of the key -- the red channel, the blue channel, the resulting matte, and the final result of the image with the matte applied.
Where you change the view to the four-pane view

These are called "Partial A", "Partial B", "Matte" and "Final" respectively.
The view now shows the partial mattes, the final matte, and the final result

4)    Now extract a key from the blue screen
Scroll the controls down. Note the controls for each partial matte, and the final matte.
Scroll down, and note the partial mattes

These settings correspond directly to the Levels tool in Photoshop.
Compare these controls to Levels' controls

So adjust the Partial A (Red Channel) In Black control so that the background goes to black.
Also adjust the Partial A (Red Channel) In White control so that the foreground goes to white.
Partial A adjustmentst

Do the same for Partial B (Blue Channel)
Partial B adjustmentst

You can see how the red channel corrects for the white areas in the inverted blue channel.
With them both combined, the matte is essentially complete
Combining the red channel corrects for the white areas in teh blue channel

Now for a little tweek on the Matte
Matte adjustmentst

5)    Done! See your work!!
Change the view back to the Final Result
Change the view back to Final Output

Add a background if you feel like it!
Background has been added

The final result looks pretty good!

Keep in mind that this technique was originally developed for *film*!! How did they adjust the white and black areas in film? They certainly didn't have sliders!!

The way they did it is amazing and laborius! To separate the blue channel, they exposed the color film through a blue filter onto B&W, high contrast film. To create the red channel, they did the same with a red filter, then contact-printed a strip to create the inverted red channel.

To darken the dark areas, they over-exposed the film -- the exposed areas caused the silver oxide to adhere to the film.

To lighten the white areas, they over-processed the film -- the longer the film was processed in the developer chemicals the more silver oxide dissolved from the film, leaving more clear areas.

The timing of both steps was *critical*, and was different from shot to shot -- you can try a different blue screen image yourself, and see that the white and black settings will be different.

So the red channel and blue channel would be the inverse of what we did here. The background areas would be white, adn the foreground character would be black. When these two strips of film were run together, the silver oxide on both strips together blocked the light, and the clear areas in both allowed light to pass, and another strip of high-contrast B&W film was exposed to make the foreground-positive matte. The contra-matte, for the background, was a simple matter of making a negative of the foreground-positive matte. The resulting two film strips each had a matte that exactly fit eachother, reducing the matte line around the characters.

The process must have been painstaking and tedious, and very time consuming, not to mention how much film was destroyed just making negatives and positives, plus testing different exposure times and processing times! Truly an amazing special effect for film!