You should use either .jpg or .gif formats for all your graphics. Some people tend to use .png but most visitors will have problems displaying them.

Use .jpg for your photographs and select the compression so that the file is fairly small, say under 50KB, and the resolution is good. If you are not familiar with .jpg compression please see my help page on JPG Compression.

Use .gif for text graphics. In some cases it is advisable to save your graphic in both .jpg and gif and then use which ever format gives you the smallest file size along with the best resolution.