JPEG is a commonly used method of compression for photographic images. The compression method is usually lossy, meaning that some visual quality is lost in the process and cannot be restored. World Wide Web may be familiar with the irregularities known as compression artifacts (commonly known as 'jaggies') that appear in JPEG images. These are due to the quantization step of the JPEG algorithm. They are especially noticeable around sharp corners between contrasting colours (text is a good example as it contains many such corners).

You can avoid this by saving unprocessed scans in a lossless format (such as TIFF or PNG) before converting to JPEG as the last step, or saving JPEG files with a higher compression ratio (including digital art in files like PSD).

Copy-pasted from Wikipedia.

Updated by Aurelia over 15 years ago