Photoshop has the capability to open and save many different graphic files. Here are some of the most popular ones.

Note: When you open an image file other than a Photoshop one, that image will default to the background layer.

.psd, .pdd, .eps
Photoshop File. This format preserves the information in all the layers. If you're going to continue working with a picture, this is the best format to use. File size can be quite large, however. Note: It is advisable to save your work in the most up to date Photoshop format available. For example: if you have Photoshop CS and are sent a Photoshop 7 file, you should save it as a Photoshop CS file to preserve any elements that may not be supported by Photoshop 7.

.jpg, .jpeg .jpe
This format compresses the images, so that information (details and colour subtleties) are lost. You can choose how much you want to compress the image. Good format for use on the web. Small file sizes. Millions of colours.

tif, .tiff
Common in use with early scanners. Will produce high quality images, but very large files. Not for use on the web.

.gif
Pronounced both "Gif" and "Jif", this file is one of the most popular for web graphics as it loads quickly. 8 bit format (256 colours max.). It has possibilities for transparent colour and animation.

.png
New format for use on the web that is intended to replace both gif and jpeg. Compressed, millions of colours, transparencies. It compress in a different way than jpeg, and has advanced possibilities, such as alpha channel (opaque or partly transparent colours). The only trouble is: Internet Explorer doesn't support these! In 8 bit (256 colours) mode it compresses better than gif.

.bmp
Windows bitmapped image. Used by Microsoft Windows applications. Good quality, large file size. Not for use on the web.

.wmf
Windows MetaFile. Useful for clipart, and can be used to make large area, small sized background files.

.pcx
Older general purpose format. Practically obsolete now. Not for use on the web.

.psp
Internal format for Paint Shop Pro, useful if you want to swap files between these two applications.

.pcd
Kodak PhotoCD format, used with Photo Developing - although most photo processors will save your photos as jpegs if you ask them to.

.pdf
Portable Document File. Adobe's file system that allows electronic cross platform sharing of documents.

So what's the best format for web graphics: gif or jpeg?

The general rule of thumb is to use gifs for diagrams, line drawings, illustrations, and images that contain large areas of flat colour, and jpegs for photographs and images with continuous colour tones. The jpeg format has a very good compression rate, but compression reduces the quality of the image, so it's best to experiment with the tools in Image Ready until you have the optimal quality/file size. The gif format, on the other hand, has a smaller file size - but a limited range of colours.