JPEGs, PNGs and GIFs are all allowed. Anything else, it won't accept. This is largely due to the comparatively low file size of JPGs and PNGs, and GIFs are so far the only image file types capable of showing animation. JPGs are better for photographs, because there is hardly any solid blocks of colour in a photograph, whereas PNGs are better suited to vector art and suchlike, where you find large areas using exactly the same colour. PNGs can also handle transparency, which is very useful sometimes.
