Image format plays a crucial role in optimization by balancing quality and file size to suit different needs on websites. JPEG is ideal for photographs due to its efficient compression that reduces file size while maintaining reasonable quality. PNG is preferred for images requiring transparency or without loss of detail, such as logos. WebP provides superior compression techniques, offering smaller file sizes and higher quality compared to JPEG and PNG. Website owners should choose formats based on the specific requirements of each image, considering factors like transparency, photographic detail, and overall file size needs.