JPGs are suited for photographs or other high color images because of the following reasons:
Original JPG (3838 bytes). Consider this 100%
82% quality of the original (3184 bytes)
60% quality of the original (2310 bytes)
51% quality of the original (1981 bytes)
Note that pixelation starts to appear and is perceptible near the ‘crown’ because this area has some sharp color changes.
40% quality of the original (1569 bytes)
20% quality of the original (783 bytes)
For details on why GIF format should not be used for photographs, refer the section on When to use gifs.
The JPG algorithm does not do justice to images with sharp edges such as text, cartoons, line-art etc. You should choose the GIF file format for such images. Refer When to use gifs for details.
Another point: JPG does not support color transparency and animation. You might have to use the GIF format if you want these features.
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