Image File Formats: Lossy vs. Lossless

Lossy

Lossy formats compress the information in your image. That means they remove information that they find to be redundant or that can be simplified. Your resulting file size will be much smaller. The quality will be lower. This type of format is used for web. Or when speed, and file size matter more then quality.
Poplular lossy formats:
JPEG
Joint Photographic Experts Group. Pronounced “jay-peg”. Best suited to photographic images with continuous tones. Jpegs can be compressed at a range of settings to meet your size/quality needs. They contain full 24bit color information (16 million colors) and tend to look quite good to the human eye.
PNG
Portable Networks Graphics. Pronounced “ping”. This format was designed to replace the Gif format (below). It compresses better then gifs, and supports alpha channels. It is not 100% compatible with old web browsers. It is a non-copyrighted format that allows free use.
http://www.libpng.org/pub/png/
GIF
better suited for graphics, and lettering then photographs. Gif images can use a very limited set of colors from (1 to 256) to match the colors contained in your image. If your image only has 4 colors then you can adjust your gif file to match. Popularized with its “animation” feature in older websites, you know…all those cheesy irritating moving things that are cool for 1.5 minutes.
PDF
Portable Document Format. PDF developed by Adobe is able to imbed postscript information for nice crisp scalable fonts and vector graphics into a bitmap image that uses JPEG compression. It can also be used as a ‘vector only’ or ‘bitmap only’ file format.
http://www.adobe.com/products/acrobat/adobepdf.html

Lossless

Lossless formats do not compress your image and maintain all information so that you can edit and print your files at the highest quality. File sizes are large.

Popular Lossless formats:
TIFF
Tagged Image File Format. This is a platform independent format and is generally a standard for service bureaus who prints photographs. The Tiff format is very flexible and even includes compression options. In general I don’t recommend using compression with Tiff’s. Think of them as a lossless format only.
http://home.earthlink.net/~ritter/tiff/
PSD
Photshop format. Photoshop’s default file format supports all of Photoshop’s features such as layers, paths, alpha channels etc. (TIFF can as well)
EPS
Encapsulated Postscript. Used primarily to send vector and postscript font information to a postscript printer.