About file formats

JPG | Best for photographs, or images with fine gradations of color. Produces small, "lossy", but near perfect, copies in full color. Set JPG file compression (accuracy vs file size) by clicking the Misc tab in the Options dialog.
PNG | Best for non-photos. Produces exact copies in full color with the smallest files. This is a new, free web standard.
GIF | Most common - produces small files that are exact copies, except limited to 256 colors.
BMP | Best if the image isn't being sent anywhere. Large, uncompressed, full color files, readable only by Windows.