Image Quality, Size & Resolution
Tip: Use the settings that suit your needs best. If you just need to send an image via email, try to go for a low image size and quality, as the file size is smaller.
If you need to print the image, always go for the highest image quality and size, though the relatively large file size would mean a need for more storage space, and also take longer processing time both on your computer and on your digital camera.
Most people always face the greatest difficulty in understanding the differences between image quality and resolution. Equating dpi (dots per inch) to resolution is a very common misconception.
Image quality is primarily dependent on the compression technique and level of compression, and also directly affects the file size. If an image is saved in TIFF, the quality is the highest and as there is no compression that affects the image quality, the file size is also very big.
If an image is saved in JPEG, the quality is not as high as TIFF as it undergoes compression. The image quality is then dependent on the amount of compression. The higher the compression, the smaller the file size, and the lower the image quality. Conversely, a low compression would mean a larger file size, but better image quality.
Image size is basically how big an image is, and is usually expressed as x by y pixels - eg. 1600 x 1200 pixels. This means that there are 1600 horizontal pixels and 1200 vertical pixels. This equates to 1,920,000 effective pixels, which is the common specification for 2 megapixel cameras.
Image resolution, on the other hand is used when the image is to be printed or viewed on a monitor. Common values are 300 ppi (pixels per inch) which is used for printing, and 72 ppi for viewing on monitors. For the example of 300 ppi, this means that 300 pixels are squeezed into a length of 1 inch. If an image composed of 1600 x 1200 pixels is printed at 300 ppi, we will get a size of 5.33 x 4 inches.
To get a high image quality, try to use settings such as "Hi", "Fine", "Super Fine" or "Uncompressed". Some cameras also let you set the size of the image, but most simply link the image quality and image size, and this is what causes the confusion.