After working with images for the Web and print, most people fall in love with the JPEG format. It stores images at 16 million colours and you can set your own resolution. Two additional tricks mean file sizes are compact and you have control over image quality versus file size.
First, JPEGs are optimised for the human eye, which is more sensitive to changes in brightness than colour. A JPEG discards some of the colour information (also called undersampling), thereby reducing the amount of data in an image.
Its second trick is the compression setting, sometimes called the quality setting. Simply put, if two dots next to each other are very close in colour, they will be replaced by two dots of the same colour that is an approximation of both. So, instead of storing the information for two separate dots, it draws the new single dot twice - this requires less data. The quality setting tells the JPEG format how close the dot's colours must be before combining them. A high quality setting will mean that dots will have to be very similar before they are combined; a low quality means they can be quite far apart.
For print, the setting should be high, but for the Web, it should be in the lower range - "3" in Photoshop or "30%" in Paint Shop. JPEGs for the Web should be no more than 72dpi. For print, JPEGs should be at least 300dpi. Another feature is that JPEGs (and GIFs) can be easily transferred between various platforms such as Mac, Linux, BeOS and Windows.