How do I fix transparent display and retained images on a MacBook Air?

It sounds like some setting is off. Are you using any optimization tools? Those which manage system cache can actually cause system settings to go askew. Don't use optimization tools. The only tools you need are a backup, and to make sure your hard disk doesn't get over 85% full.

Free up storage space on Mac - Apple Support

Tinkertool is a tool you can get that may affect transparency settings. If you have that installed, open it up and manage the settings from there. But don't use any of the functions there as some are really for strictly advanced users who know what they are doing.

Follow this tip on how to check for memory resident applications and remove them.

I've seen reports of this in multiple places referring to the 2020 MBA.

There are 3 likely possibilities.

Burn in. This probably isn't what's happening, but it's possible.

A failure of the LCD itself.

A software bug. This was widely reported shortly after the release of that model and the issue seemed to resolve itself with a macOS update. I've seen some reports that the problem later returned, then vanished again, likely due to updates.

If you're not completely up to date, update to the current version of macOS. See if that helps.

If it doesn't, it may be time for a trip to the Genius Bar.