Choosing an Image File Format

Raw bitmap format : TIFF, PICT, BMP, RAW ... need to be compressed to be put on the web, into ...

Image Type Gif Jpeg PNG
Pronunciation Either"Jiff" or with a hard G, like "Give" Jay-peg Ping!
What it stands for Graphics Interchange Format Joint Photographics Expert Group Portable Network Graphics
What it's good for Images with a few distinct colours, including line art and simple colours. Supports animation. Images with lots of colours and or shades, such as photos and lifelike images. No animation. Upcoming format. Combines best features of GIF and JPG. Use sparingly for now, but keep an eye on it for future use.
What it' not good for Photo-realistic images with colours that blend : They'll appear broken and jagged Pictures - either graphics or photos - with large areas of a single colour Photographs (size issue only)
Colours 1-bit to 8-bit (256 colours) 24-bit only (millions of colours 8-bit, 24-bit or 32 bit
Animation Yes No Yes, with MNG
Transparency Yes, a single colour can be transparent No Yes. Plus 256 levels of partial transparency
Compression Lossless ( ! ) Lossy Lossless ( ! )
File Size Images can be reduced to truly tiny file sizes, but compression isn't as good as it could be File size tends to be larger than GIFs, but the target is not the same anyway Compression is excellent (better than GIF)
Advantages

+ Tiny Images
+ Animation (Gif 89a)
+ Transparency
+ Well supported
+ Interlacing

+ Excellent colour retention
+ Excellent compression
+ Simple compression process

+ Excellent compression, with no loss of quality
+ Suitable for a wide range of images
+ Excellent cross-platform viewing
+ To be use for alpha chanel and transparency with photographs

Disadvantages - Complicated optimisation process
- Certain visual effects (glowing light, feathered edges, vertical stripes ... compress poorly)
- Not patent free !!!
- Not much control over compression process
- No transparency
- No Animation
- Not yet widely supported

Source : The Unusually Useful Web Book / Everything we've learned about why sites succeed! by June Cohen / New Riders

A must read : Compression / Optimizing Web Graphics from Webreference.com ( http://webreference.com/dev/graphics/compress.html )