Hi Rhindon, Cool Avatar!
The set up is based on a black sprite for the background - Plain, ordinary... nothing special. The light sprites were created externally. Just a circle with a gradient edging. White fading to transparent. These sprites have an effect > Blend mode added to it. Click on the Sprite and check the list to the level. It should say "Normal" as default. Change this to "Destination out" and you're done!
As far as I am aware, this only really works with black and white sprites, but I may be mistaken. Give it a go, and let me know if you have any issues.