An image file format is a way of encoding (organizing and storing) digital photos. There are many image file types, including JPEG, GIF, TIFF, and PNG.
One of the main differences among file formats is the type of compression each uses. Compression is a way to make a file smaller. Because image files can be very large (they include a lot of data), they are usually compressed so that they take up less storage space and download faster.
Compression can be either lossy or lossless. Lossy compression loses some image data, but the loss might be imperceptible in the resulting image. Lossless compression discards no information.
iPhoto can open many popular image file types; it is designed to work best with JPEG files.