A simple AppleScript that allows you to toggle the transparency of the active iTerm window. Best implemented as a service through Automator (and mapped to an unused keyboard shortcut of your choosing).

toggle_opacity.applescript

tell application "iTerm"
  if the transparency of the current session of the current terminal > 0 then
    set the transparency of the current session of the current terminal to 0
  else
    set the transparency of the current session of the current terminal to 0.2
  end if
end tell

toggle_opacity.md

I'm getting Expected “then”, etc. but found identifier. when I try to run the script.