Image compression technology works by reducing the file size of images while maintaining acceptable quality. Two main types of compression exist: lossy and lossless. Lossy compression reduces file size by permanently removing some image data, such as through the JPEG format, while lossless compression retains all original data, as seen in PNG files. Algorithms analyze image content to identify and minimize redundancies, often using techniques like quantization or Huffman coding. The result is a smaller file that loads faster and consumes less storage, crucial for web usage and efficient data transmission.