Graphics file formats refer to the type of picture file, shown in the filename extension, such as ".jpg" or ".gif." The file format determines what kind of compression is applied to the picture and the range of colors supported.
The .JPG file format is typical for digital photos. Its type of compression creates a small picture file — that's one of its great assets. But, its compression is also lossy, which means that picture information is lost in the compression process. This often is not a factor in the look of your images in a presentation.
Some presentation designers prefer the .PNG format. This format creates a larger file size (sometimes significantly larger) than a .JPG. But its compression is lossless. You don't lose picture information. Another attraction of .PNG is that it supports variable transparency.
Other common graphics file formats are .BMP, .GIF, and .TIF. These work fine in PowerPoint, but note that .BMP files can be very large. The .GIF format works especially well for images that include big solid-color areas. A downside of .GIF is that it is limited to 256 colors. The .TIF format has similar characteristics to .PNG.
Photo editing programs allow you to export your photos to a specific format. The Quick Reference Card has more on this.