A typical 3 megapixel digital photo contains around 9 Megabytes' worth of information. So if you've got a 64MB memory card you'd be looking at a maximum of seven shots before it was full. However, JPEG uses some very clever maths to reduce the file size to as little as 1/100th of its original size without reducing the number of pixels in the image, thus allowing you to save many more pictures.
But there is, inevitably, a downside. In order to make such space savings JPEG has to discard some of the information in the original photo. This is referred to as 'lossy' compression, (because something is lost). But it's nowhere near as bad as it sounds! JPEG offers the option to vary the amount of compression, and the less compression used, the less noticeable the loss of quality is to the human eye.
In fact, at low compression levels the loss is hardly noticeable. Even if you compress the file to 1/20th its original size you will only see the 'artefacts' (JPEG compression errors) if you really zoom in on-screen, or print your pictures very large. Because of this, most cameras use compression ratios in the 1:5 to 1:25 range, and most offer the option to decide between high compression (lower quality, lots of pictures) and low compression (better quality, fewer pictures).
If you edit your image in Photoshop, it will ask you at what level of compression you want to save the image. Always choose medium or high to preserve quality.
As well as preventing possible loss through computer or disk failure, it's worth talking for a moment about the unique nature of JPEG, and how to avoid any degradation of your pictures. As we have discussed, JPEG uses a form of compression to reduce the amount of disk space taken up by each image, and that compression causes a slight loss of quality, usually invisible to the naked eye.