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Most digital cameras can save files as JPEG (JPG) files. In fact, most point-and-shoot models only offer a JPEG option. But as you explore your camera's menus, you'll notice that you still have some control over the files you save.
First, most cameras offer various resolution options. These are usually expressed in terms of so many pixels by so many pixels (For example, 1500 x 2000, which equals 3 megapixels.) or by megapixel count (For example, 5 MP.). Simply put, the bigger the number, the more detail the resulting image will have - and that means better quality.
I recommend always shooting at the highest resolution your camera offers. You can always use your image-editing software to make a file smaller, but you can't increase the quality of an image beyond it's original size.
The second option digital cameras offer for JPEG files is compression. Typically, you'll have three options, large, medium and small. Large files retain more data, while small files discard more of the image data. And because of this, I recommend you always save files using the least compression possible. (In other words, save using the "large" option.) Here's why:
JPEG is a "lossy" file format. During compression, "redundant" data is discarded to allow for a smaller file. Once the data has been discarded, it can't be recovered. So, to ensure the highest quality images your camera can offer, save your JPEG files with the least compression possible.
But JPEG's have another problem with "lossiness." Every time you resave a JPEG file, it loses a little more image data. In theory, you'll eventually degrade the file to where all the data is lost. (Of course, this would require a lot of saving and resaving.) But you can get around this problem easily.
You can open and close a JPEG file as much as you'd like without losing data. It's only when you save a JPEG that data is lost. So, if you don't overwrite your original files, they won't suffer any further loss in quality. Instead, if you edit your JPEG files, save the edited version under a new file name. That way, you'll always have the original - highest quality - image file to work from.
Follow these three simple guidelines, and you'll always get the best out of your JPEG images.