Note: Using the Low (8-bit) option, JPEG images will be published as JPEGs. The compression JPEGs is controlled by the JPEG quality percentage via the SWF size and quality preferences (via File > Publish Settings).
Optimized: All of the images in the project will be published as bitmaps (even the JPEG images). This option will result in nice-looking images, but will increase the size of your published SWF dramatically.
JPEG: This option is similar to Optimized, except all of the project images will be published as JPEGs instead of bitmaps. Since the JPEG format does not support transparencies, some images could end up looking fuzzy.
High (24-bit): Publishes images as 24-bit bitmap images (except JPEGs). This option will result in the hightest quality images, but the largest published SWF.