In the early days of PC graphics, many images were created by positioning small, single-coloured dots on a page. As the quality of screen displays improved, so did the number of dots (or pixels) and colours. It wasn't long before these bitmap files became huge and inefficient at storing data. Techniques were developed for compressing the image data, leading to the development of TIFF files.
Most TIFF files use LZW Compression which works on a very simple idea. Instead of recording the dots one by one, it looks for patterns and replaces these patterns with a symbol. Each time the pattern reappears, the symbol is used (a bit like a dictionary). To rebuild the picture, each symbol is looked up in the "dictionary" and replaced by the original sequence of dots. TIFFs are ideal for storing files without losing quality and are especially useful when transferring files between incompatible graphics packages (provided you use the same compression option such as LZW). There are no inhibiting limitations on the number of colours or resolution, but the files can be quite large and difficult to transport. TIFF is a non-lossy format and is quite suitable for print media, but it is unusable on the Web. Avoid using BMP as the files are unnecessarily large.