Wowpedia:Image guidelines/JPEG

JPEG, Joint Photographic Experts Group, usually designates an image file format (.JPEG or .JPG) that uses lossy compression, designed specifically for photography. It achieves a significant reduction in file size by encoding image data as a series of interfering frequencies, stored with varying degrees of precision, eliminating information that is less visually relevant. At high compression levels, image quality can decrease significantly.

This algorithm works well for photographs and other "blurry" graphics such as WoW game screenshots, but not so well for computer-generated "blocky" graphics (e.g. AddOn screenshots, chat windows, etc.).

Note that even at maximum quality, JPEG files are not guaranteed to be lossless. A "lossless JPEG" format specification does exist but is not supported by any mainstream applications.

One distinct lacking feature of the JPG file format is that it does not handle transparency; it is only suitable for completely rectangular and opaque images. For transparency support, the PNG file format is highly recommended (it uses a lossless compression algorithm, so the files tend to be bigger, but will not display any compression artifacts or loss of detail).