PNG stands for Portable Network Graphics, and is usually pronounced as 'ping'. It started to gain in popularity when Unisys started claiming licence fees from web sites that used GIF files.

PNG files can be similar to GIF, inasmuch as they are optimised for images which have just a few colours, such as cartoons,maps, diagrams, buttons, etc. Like GIF they are lossless, i.e they lose nothing during encoding, and use a palette of up to 256 colours. Instead of the patented LZW coding method, they use Zlib, which is a free alternative. By varying the level of compression,and optimising the transformation filters, better compression than GIF can be obtained.

PNG also has two other options. These are the ability to encode RGB at either 24 or 48 bits, and alpha channels.

The 24-bit colour option allows the lossless encoding of true colour images like photographs with up to 16 million colours. Click here to download (59k) a huge picture with all 16 million colours, it's only 59k in its PNG form, but convert it back to a bitmap and it's 48 megs!

The alpha channels govern transparency. While GIF images allow a colour to appear as transparent, PNG has 254 levels of transparency. It does this in RGB 16-bit mode by having four channels: R, G, B and alpha, each having 8-bit resolution. Variable transparency is also possible in 8-bit palette mode. These alpha channel can make a big difference on the web: now images can fade into the background, or have transparent shadows - many new artistic effects are possible. Or would be, if browsers supported PNG properly. As far as I know, only the RiscOS Browse works correctly. Opera probably does too.