For the complete FAQ, see:

[1] What is JPEG?

JPEG (pronounced "jay-peg") is a standardized image compression mechanism.
JPEG stands for Joint Photographic Experts Group, the original name of the
committee that wrote the standard.

JPEG is designed for compressing either full-color or gray-scale images
of natural, real-world scenes.  It works well on photographs, naturalistic
artwork, and similar material; not so well on lettering, simple cartoons,
or line drawings.  JPEG handles only still images, but there is a related
standard called MPEG for motion pictures.

JPEG is "lossy," meaning that the decompressed image isn't quite the same as
the one you started with.  (There are lossless image compression algorithms,
but JPEG achieves much greater compression than is possible with lossless
methods.)  JPEG is designed to exploit known limitations of the human eye,
notably the fact that small color changes are perceived less accurately than
small changes in brightness.  Thus, JPEG is intended for compressing images
that will be looked at by humans.  If you plan to machine-analyze your
images, the small errors introduced by JPEG may be a problem for you, even
if they are invisible to the eye.

A useful property of JPEG is that the degree of lossiness can be varied by
adjusting compression parameters.  This means that the image maker can trade
off file size against output image quality.  You can make *extremely* small
files if you don't mind poor quality; this is useful for applications such
as indexing image archives.  Conversely, if you aren't happy with the output
quality at the default compression setting, you can jack up the quality
until you are satisfied, and accept lesser compression.

Another important aspect of JPEG is that decoders can trade off decoding
speed against image quality, by using fast but inaccurate approximations to
the required calculations.  Some viewers obtain remarkable speedups in this
way.  (Encoders can also trade accuracy for speed, but there's usually less
reason to make such a sacrifice when writing a file.)