In general, use GIF for line art, use JPG for photographic images. The difference is that GIF is a lossless format limited to 256 colors whereas JPG is a lossy format with a limit of millions of colors. The Gif89 export method offers more control over the GIF image, including transparency and interlacing. Note that photoshop will not let you save an image in GIF format until you convert the image from RGB to indexed color . When you save in JPG format, photoshop prompts you for the quality of the image.
More compression means poor image quality, less compression means better image quality.
If you save the images on local disk, make yourself a folder in the workspace folder. Keep all of your images in this folder. Beware that the contents of the workspace folder may be deleted at any time. A better solution is to save all of your images on your own Zip cartridge. For details about the many graphics file formats, see The Graphics File Format Page .