"JPEG (Joint Photography Experts Group) can produce a smaller file than PNG for photographic (and photo-like) images, since JPEG uses a lossy encoding method specifically designed for photographic image data, which is typically dominated by soft, low-contrast transitions, and an amount of noise or similar irregular structures. Using PNG instead of a high-quality JPEG for such images would result in a large increase in filesize (often 5–10 times) with negligible gain in quality.
PNG is a better choice than JPEG for storing images that contain text, line art, or other images with sharp transitions. Where an image contains both sharp transitions and photographic parts a choice must be made between the large but sharp PNG and a small JPEG with artifacts around sharp transitions. JPEG also does not support transparency.
JPEG is a worse choice for storing images that require further editing as it suffers from generation loss, whereas lossless formats do not. Since PNG's extreme inefficiency in compressing photographs makes it not useful for saving temporary photographs that require successive editing, the usual choice is a loss-less compression format designed for photographic images, such as lossless JPEG 2000, or Adobe DNG (Digital negative). When the photograph is ready to be distributed, it can then be saved as a JPEG, and this limits the information loss to just one generation. Furthermore, PNG does not provide a standard means of embedding Exif image data from sources such as digital cameras, which makes it problematic for use amongst photographers, especially professionals. TIFF, JPEG 2000, and DNG do support such meta data.
JPEG has historically been the format of choice for exporting images containing gradients, as it could handle the color depth much better than the GIF format. However, any compression by the JPEG would cause the gradient to become blurry, but a 24-bit PNG export of a gradient image often comes out identical to the source image, and at a small file size. As such, the PNG format is the optimal choice for exporting small, repeating gradients for web usage."
courtesy wikipedia