About Images

GIF is lossless, max 256. Encumbered by patents.
JPEG is lossy, high photo compression.
PNG is the new GIF. Its smaller, millions of colors, lossless, alpha channel, no patents.
The jdk has a jpeg encoder in com.sun.image.codec.jpeg.
Sun's Java Advanced Imaging API has a PNG encoder.
You can also combine images and modify existing images dynamically.