Image compression is the art of removing data that the human eye cannot perceive.
Lossless Compression
Think of this like a ZIP file. It rearranges the data more efficiently without deleting anything. When you open the file, it is identical pixel-for-pixel to the original. This typically saves 10-20% of space.
Lossy Compression
This is what PhotoDiet uses for maximum savings. It intelligently groups similar colored pixels. Instead of saving 100 variations of 'blue' for a sky, it might save 10. The result? Up to 80% size reduction with barely noticeable visual difference.