If you put a breakpoint at line 239
set(h_ax1, 'AlphaData', bw);
you will observe that bw will have the same dimensions as your input image. So if the input image is mxnx3, then bw will be mxnx3 as well. According to http://www.mathworks.com/help/matlab/visualize/mapping-data-to-transparency-alpha-data.html#f3-6784
In order to use nonscalar alpha data, you need to specify the alpha data as an array equal in size to CData of images and surfaces or…
Since CData is your original image, your bw has the correct size in width and height (mxn). What is not all that clear from the notes but probably should be based on the context is that your AlphaData should be mxnx1. Your line of code then becomes
set(h_ax1, 'AlphaData', bw(:,:,1));
Try this and see what happens.
