Originally Posted by Pintu

Manual image optimization is an easy process and not something that you should have to go out of your way to do. First of all, you should be tinkering with all your images in Adobe Photoshop. Other programs, despite promise, are not on the same level as Photoshop. After you have manipulated your image to the correct appearance and canvas size for the job, you need to use the “Save for Web” command from the file menu. This will allow you exercise fine-grained control over the image and its file size.

The first thing to do is select a format for the job. A rule of thumb, If your image is similar to a photograph, you should be using a .jpg format. If your image is more similar to a graphic, you should be using a .gif or .png format. Many sites have jpegs when they should be using gifs or pngs. When in doubt, trust your eyes and toggle back and forth between jpg and gif. Make sure you look for distortion around sharp edges in .jpgs as a sign of poor quality.