Mystified, welcome to TZ. If you are new to computers we can help! In no time you'll be puttering around on the web like Steve Jobs or Bill Gates.

This site:
http://en.wikipedia.org/wiki/File_extensions

explains in great detail what a file extension is. Every file on your computer has an extension. Image files are usually jpg, jpeg, png, bmp, tiff, gif, psd, etc as Bhxtyrant pointed out.

each one has different properties and compressions styles that change the way an image looks and how big it actually is.

Take a look at the attachment (the picture at the end of this message) to see two examples of file extensions.