They're JPEG
Currently the single 640x480 image is around 60KB - I do want to upload multiple resolutions though.
No idea about compression.
I've found a service I used in a past which is "free" and offers 100GB bandwidth.
www.000webhost.com. It seems to be working fine there, but I remember them being a bit slow in the past, I'll see how it works out.
EDITED: 22 Nov 2012 17:56 by ANT_THOMAS