Need help - Don't know what I did

I'm not sure what setting I turned on, but here's the problem. I'm have a image that I use as a default. I use the marque tool to select what I need copied. After doing a Copy Merged I go ahead and create a new image to paste it on and save. I don't know what setting I turned on but every image that is pasted now has a faded border on the bottom and sometimes on top.

What I and trying to Copy:


What happens after I Paste:

What's on your Layers palette? Is it showing some kind of effect... say a drop shadow?