Attached Link: This Quickie Tutorial Brought to you By (let's hope i can remember my url this time...)

heyas; we all use jpg files to transfer texture images; it's cross-platform, and it's compressed. but the image quality can be lousy. here's how to get maximum compression and minimum smeariness. (note: you'll need jpeg opimizer, which is available from www.zdnet.com) open your texture file in jpeg optimizer (if you use tifs, they have to be uncompressed). make sure advanced mode and the wizard are both on. crank the quality slider up until the colour preview window shows no loss. (75-100, depending on your image.) now, in the wizard window, click on 'select all,' then slide the 'extra compression' lever up to max. the greyscale compression map should turn completely a rich, ruby red. your preview pic should turn all icky and lossy. (uncheck the 'work on region box' to deselect.) well, now click on the no compression icon in the toolbar and use the line/rectangle/freehand selection tools to 'decompress' the texture bits, while leaving the 'emtpy' space between them hugely compressed. after you do this, you can play with the overall quality slider some more, and decide on the best setting for it. ta-da! unused portions of the pic are compressed, and used portions are uncompressed, giving you a balance of file size and quality.