Well, when i use photoshop I can save my images in two different PNG-type formats.
PNG-8 is an image-type similar to a GIF. You're limited to, at most, 256 colors. You can also have transparent sections but, like a GIF, they are transparent or not, so you end up with jagged edges.
PNG-24 is a higher quality image format that allows transparency that can be gradiated. So instead of having a hard edge, you can have soft edges (like drop shadows) and entire translucent sections. Unfortunately, the trade off is that the filesizes for PNG-24s can be much higher than PNG-8s since the 24 can allow for a larger amount of colors.
