I’m posting this because I think many people are not familiar with Portable Network Graphics and are therefore afraid of it. TMW2: Moubootaur Legends uses the Portable Networks Graphics format for all sprites and icons.
One thing that I would like to make clear is that PNGs are lossless. They use zlib compression (like in gzip). It will not mess up your image to compress it.
Another thing to make clear is that PNGs support full 24 and 32bit color. You will not lose colors upon saving.
PNG graphics can be optimized up to 256 colors, good for pixel art. It requires some tweaking to do losslessly, but it saves space when you know how.
Unlike GIF, PNG has an entire alpha channel. Images can have areas that are partially see-through.
Fully compressed PNG files do not benefit any from being put in compressed archives. They go nicely in non-compressed tape archives (tar). You can mount tape archives and browse the images inside, or change the .tar suffix to .cbt for viewing in comic book readers.
The best speed to compression ratio is 6. PNGs that are fully compressed (9) are slower to unpack. I don’t know how this affects gameplay. Nine is best for larger files that will take some time to display anyhow.
PNG is best for icons and sprites, not photos. It replaces the need for unanimated gif, and .bmp (don’t rely on MSPaint for it’s .png support though)