You can use any image format that can be interpreted by a browser, but there are advantages to using certain image file-types for different applications.

GIF and PNG can be used for site-style purposes, such as logos, sidebox headers, background images and other small graphics that are part of the overall design. The advantage of GIF is that you can make animated gifs for stylistic reasons, and with both PNG and GIF, you can designate a transparency colour - helping such images to render well against backgrounds.

JPG is recommended for product images, because these produce the best quality image, relative to file-size. Additionally, many of the image enhancing modules (Image Handler 2) will not function with files other than JPG, so you will lose out on some nifty zooming and "image polishing" features that are now built into these mods.

TIFF, BMP, TGA ... etc are not recommended becuase they are usually very large files and will take ages to load in a browser. Again, the image management tools won't perfom much of their "magic" with these formats.

Images should be named with alpha-numeric characters only, and should NOT contain empty letter spaces or "exotic" characters such as @, &, $, [, (, %, !, etc...

File extensions should be lower case and (if on a unix/linux box) then all filenames should be lower case too.

As it is preferable to use model numbers in zencart (SKU's), I advocate naming an image after its SKU.

So, if you have a product with model number xyz-009911, then its corresponding image will be xyz-009911.jpg . This makes it quick and easy to find images relating to products, and helps in the efficient management of content in your webstore - particularly if you have a large number of products.