There are several file types for storing pictures.

*BMP (bitmap) images are direct records of the state of every little colored dot on the screen. The file size is large, and the picture may not be viewable by everyone. For these reasons, it is better to use one of the other image types if possible.

*GIF images compress the file and make it much smaller, in a way that is most appropriate for a diagram which only contains a few colors and has large areas of a solid color.

*JPEG (or JPG) compresses the file in a different way, that is most appropriate for a photograph (which usually does not have sharp-edged regions, or regions of composed of just one color).

GIF
JPEG

Here is a comparison of the file types. The first picture is more appropriate for a GIF. You will notice that the JPEG version has some blurring of the sharp edges. The GIF is the smallest file; the JPEG is three times larger, and the bitmap is 3 times larger than that. The second picture is more appropriate for a JPEG. The GIF version is three times larger than the JPEG (but still 5 times smaller than a bitmap).
*There are many other types of digital image, but you cannot count on other people having the right software to view them.

The choice of type of image is made when it is created. During the File --> Save As… step you are asked to give a name to the file; at the end of the little type-in spot into which you put the name there is a pull-down menu that lists the possible file types. If the program is already offering to save as JPEG or GIF type, leave this unchanged (i.e. don’t try to change a JPEG into a GIF or vice versa); if it is being saved as some other image type, change it to JEG or GIF if these options are available.