Lossy compression:

Lossy compression is the term used when a image file is reduced in memory size and in doing so many colours from the image are "thrown away".
The colours that are removed cannot be restored so once they are gone they are permanently removed from the image.

Lossless compression:

This is the same method in many ways as lossy compression in which colours are removed from an image file to reduce the file size, however lossless compression has the advantage over lossy as the colours which are removed can be restored at any time making editing the image again if need be a relatively easy task.
File sizes are also allot larger than lossy files due to the increased amount of information being stored.
The overall difference is lossy compression permanently removes colours to reduce file size and lossless removes the colours also but gives the opportunity to restore them at any time.


GIF:

This stands for Graphics interchangeable format, this type of image file is largely used on images that feature allot of lines, for example maps.
Unfortunately GIF images are poor quality if used for photos and detailed pictures as the max amount of colours is only 256 and vector graphics are used, on the plus side due to this the image files are a relatively good size and they are in lossless format.



An example of a GIF image


PNG:

PNG stands for Portable network graphics, this type of image file uses lossless compression and is extremely suited for photos and detailed pictures, it uses Raster graphics.
It also offers features such as transparency but does not store any additional information.
The file sizes from this type of image are generally quite large due to the amount of detail.



A good example of a PNG image


PSD:

PSD is the image file that is used in Photo Shop, it uses lossless compression and has extremely high quality.
File sizes can be very large due to large amounts of information being stored such as layers, masks and transparency.
This type of file is very good for photos, the graphic type used is Raster.
TIF:

TIF is the term used for Tagged image file.
TIF files are high in quality and have large files, other information can be stored with the image and it usually uses lossless compression rather than lossy.

BMP:

BMP stands for Bitmap.
Bitmap images are not used by many people as the only software that really uses this file type is Microsoft paint, although the quality may be high no compression at all is used which results in a huge file size!

JPEG:

JPEG images are probably the most common type of file type.
Camera phones use this format but it should not be used for photos.
JPEG has 16 million colours and is relatively detailed with good quality.
On the downside it uses lossy compression so this image type cant be edited more than once.

A JPEG image