JPEG (Joint Photographic Experts Group, the standards body that created the image format) is a lossy image compression file format which offers a variety of quality levels and the image's file size are generally proportional. JPEG images inhabit the YUV color space, which uses brightness, hue, and saturation to represent an image.

SL textures and heightmaps use the JPEG2000 format, which is actually altogether different from JPEG.

See also: JPEG article at Wikipedia.