Digital Home Thoughts: PC Magazine Explains Common Graphic File Formats

"You can gain more control over the quality and size of your images by picking the right format for the job. Graphics files usually contain one of two types of data: raster—colored dots (or pixels) arranged in rows, and vector—images composed of lines, polygons, and text. Raster formats are ideal for photos, and vector formats are best for logos and diagrams. Vector formats use smooth outlines to create objects, maintaining quality even when an image is enlarged or reduced.

Generally speaking, there are three factors to weigh when considering graphics formats: the output media (print or Web), the format's specific features, and your workflow. Typically, the only Web formats worth using are those supported by most browsers: GIF, JPEG, and SWF. Large raster images are more download- and memory-friendly if they're compressed, but lossy compression schemes (such as JPEG) shrinks images by discarding data. Also, some formats support simple transparency (where designated pixels are opaque or clear), and others offer gradient (or alpha channel) transparency effects."

One of the fundamental pieces of knowledge necessary to working with digital images is understanding what file format is appropriate for specific tasks. This PC Magazine article is a good overview for beginners - give it a read!