A PSD file is known as a Photoshop document and was developed by Adobe in order for Graphic Designers to create layered images. PSD is the propiertry format that Adobe uses to allow these files to be saved in, they can then be either opened in various versions of Adobe Photoshop or if a user wants to send them to others they can be flattened to PNG, JPG or other more standard image formats. You can't however re-convert a JPG/PNG file that has been converted from a PSD back to a PSD file - it loses it's layers.
Photoshop files have the .PSD file extension, this PSD stores an image with support for a lot of imaging options such as Masks, transparency, clipping paths and duotone settings. Sometimes Photoshop files have the extension .PSB which essentially stands for Photoshop Big, this allows images to support up to a maximum height and width of 300,000 pixels and a length limit of 4 Exabytes.
JPG's are often used for web sites and email as they are generally smaller file sizes as they are lossy meaning that some image quality is lost when the JPG is compressed and saved. The resultant 'lossy' file means that quality can never be recovered. The JPG format is often used in digital camera memory cards. The JPG file is a great format as it often manages to compress files to 1/10 of the size of the original file which is especially good for saving on bandwidth.
JPG is a graphical file format for editing still images, it offers a symmetrical compression technique which is processor intensive and time consiming in both compression and decompression. JPEG is a joint standard of the International Telecommunications Union (ITU-T T.81) and the International Organization for Standardization (ISO 10918-1). JPEG involves a lossy compression mechanism using discrete cosine transform (DCT). Compression rates of 100:1 can be achieved, although the loss is noticeable at that level. Compression rates of 10:1 or 20:1 yield little degradation in image quality.
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