Gif or Jpg

The general rule is to use jpg format for photos and gif for artwork (i.e. images which have regions of homogenous colour)

Compare the same photo saved in the two "web" formats below (both file sizes are around 16kb).

The top image is the jpeg and compresses much better than the gif below it.

Gifs have the advantage of being able to contain transparent sections thus enabling the to blend in with different colour backgrounds.

Transparent gif with coloured background	Same gif with white background

Often complex images containing both text and photos are spliced into smaller images so that portions can be saved as jpg and others as gif.
See http://www.phys.unsw.edu.au/ and http://www.phys.unsw.edu.au/scitech/index.html