The JPEG format in which you just saved your butterfly image is probably the most appropriate format for a "natural" image. The original butterfly image we started with was saved in a format peculiar to the Photoshop program. Photoshop's format preserves all the details of the image, but the JPEG version requires roughly one tenth the space in the computer's memory. A third file format one could use is the GIF format.
The GIF option was not available when you saved your JPEG file because GIF files can only be used with 8-bit color images and you have been working with 24-bit color. In fact, you had to work with 24-bit color. The filters we used are not available if an image is stored in 8-bit color.
Photoshop makes it easy to switch back an forth between 24-bit and 8-bit, but you must recognize that when you go from 24-bit to 8-bit, information is lost. Although you can go back to a 24-bit representation of the image, it won't be the same image as the original 24-bit representation.
You should notice a significant change in your picture after this change. The program has done the best job it can of approximating the original with the system palette, but the difference is noticeable. Photoshop can do better if you let it pick the best set of 256 colors it can find.
Congratulations. You are finished preparing the butterfly image.
Note that when you saved in GIF format Photoshop didn't require you to select an image quality. This is because while GIF only allows you to store 256-color images it stores them exactly. While the step of switching your image from RGB color (24 bit color) to indexed color (8-bit color) may have reduced the quality of the image, there is no additional loss of quality involved in the process of saving it as a GIF image. This is not the case with JPEG images.
As a result of this difference there are situations where it is preferable to use GIF. If you have an image with only a small number of colors (a pie chart produced using a spread sheet for example), saving it as a GIF will enable you to save space without any loss of quality.
Having said all this about the relative advantages of GIF and JPEG, we also need to talk about the third format you used for saving files above, PhotoShop format. The advantages of this format is that it preserves the quality of your image, save details of not just the image but items you have used to manipulate the image (like selections) and can be quickly read and written by the PhotoShop application.
The disadvantage of this format is that the files produced are often enormous.
So, while it is wise to keep images in this format while you are editing them. Once you have produced a final gif or jpeg version of the image you should delete them (or risk filling up our entire file server). So,