The first step in compressing an image is to select the output type of image you want. If you are re-compressing an image you can leave the selection at the default setting (i.e.the same type as the input file).

Experience and personal preference will be you best guide as to which file type to use. You can also experiment with two or more file types and choose the best one. Here is a summary to guide you:

JPEG Select JPEG compression for photographs or real world scenes with complex detail and many colors. If you are in doubt then JPEG (with MagiCompression) is probably the best choice if you want high compression.
GIF Select GIF compression for images with few colors, sharp edges or areas of solid color. Examples of this type of image are line drawings, scanned text, cartoons and screen grabs.
PNG You can use PNG compression as an alternative to GIF. PNG will usually give you more compression. Some early browsers don’t support PNGs properly and Netscape Navigator does not support transparent PNGs.
TIFF Use TIFF if you want to save an image with no compression or color reduction. This is useful if you want to import the image into another program.


Step 2 (GIF/PNG) Reduce the number of colors
Step 2 (JPEG) Reduce the quality

Step 1: Select between JPEG, GIF and PNG