Image Settings
Tip 3 - JPEG Compression
The JPEG format is the universal file format for images. When you shoot in the JPEG format your photographs are compressed in size to take up less space on memory cards. JPEGs are easily transmittable via e-mail and websites. Virtually every photograph you see online is a JPEG.
What is JPEG?
JPEG compression works like this: Say you photograph a blue sky. Your camera is capable of capturing dozens of variations of the blue in that sky, even when your eye can't differentiate between some of them. Let's say we have sixty different tones of blue in our photo. To save space, JPEG compression will take those sixty shades of blue and compress them down into fewer shades of blue, requiring less data to be written and providing smaller file sizes.

JPEG settings are adjustable, from high to low quality. You can adjust just how much color information is being lost by setting the quality level. At a high quality setting, the JPEG compression will only throw out differences in color that aren't even visible to the human eye. At the lowest settings, JPEG will leave telltale boxes and compression artifacts that are ugly and distracting.
File Sizes
Since the higher JPEG quality settings capture more variations of color, the photographs taken with those settings will be larger in size. Photographs taken on lower quality JPEG settings are smaller and allow you to fit hundreds of images on a memory card.
But remember, you get what you pay for. Once a JPEG image is made you can't re-adjust the compression setting. Choose your compression setting wisely. I recommend you use the highest quality level of JPEG compression your camera allows.
Compression Factors
There are three other factors that will affect your JPEG file sizes.
1. More detail = bigger file. JPEG compression works much more effectively on fields of color with little detail. For example, a blue sky, a field of snow, or a black background. These are areas of the image where JPEG can really crunch down the data, as they have no real detail. Areas of a photograph with a lot of detail, like small text, the leaves of a tree, a subject's hair, can't be compressed as effectively. JPEG primarily works on color, so the more detail in your photograph, the larger the file.
2. Longer lens = smaller file. Since JPEG primarily works on color, longer lenses (especially telephoto lenses) will give you smaller file sizes. The reason for this is that telephoto lenses have a much shallower depth of field, resulting in blurred backgrounds and foregrounds. These blurred areas lack detail and are easily compressed by JPEG.
3. Higher ISO = bigger file. Again, it's a detail issue. As you bump up the ISO setting on your camera, say in a low-light situation, your images will contain more noise. This noise must be recorded as detail, and your image sizes will be higher. Low ISO photographs have less noise, and will result in smaller files.
Conclusion
In deciding which JPEG setting to use, you are often choosing between the quality of your images vs. the number of photographs you can fit on your memory card. Since you can't improve upon your image quality after the fact I recommend using the highest JPEG quality setting your camera allows. Even though it limits the amount of photographs you can take in one session. (If that's a big problem, buy another memory card.)
If you must use a lower quality JPEG setting, make sure you closely examine your photographs onscreen and in print to ensure you are happy with the results.