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Lossy and lossless are terms that describe whether or not an image can be recovered perfectly when it is uncompressed.
With lossless compression (think “Loss -less”), all data that was originally in the file is completely restored when uncompressed. GIF and PNG are Web image formats that provide lossless compression.
On the other hand, lossy compression (Lose) reduces a file by permanently eliminating some information which is imperceptible to the viewer. When the file is uncompressed, only a part of the original information is still there although this may not be noticeable. Lossy compression is generally used for video and sound, where a certain amount of information loss will not be detected by most users. The JPEG image file, commonly used for photographs and other realistic or high-definition images on the Web, is an image that has lossy compression. Using JPEG compression, the creator can decide how much loss to introduce and make a trade-off between file size and image quality. The larger the file size, the higher the quality.