The image quality is one of the critical factor which determine the output from your camera. There are many file format & quality in camera but the most common three are JPEG, TIFF and RAW.
JPEG or JPE: Stands for Joint Photographic Expert Group developed in 1980. This is a lossy format, it reduces the size of the file by blending redundant image pixel. As the image is compressed blurriness appears around edges of the subject. Most cameras will show JPEG image quality settings of something like low (high compression), fine (moderate compression) and superfine (low compression). The only advantage of this format is that file size is low and can be used for web application or emailing. However the biggest drawback of this format is it compresses the file size by removing the vital information which can never be recovered later.
TIFF: Stands for Tagged Image File Format. This is a loss less image format as no pixels are modified in this image. This generally results for very large size files. This is a preferred file format for high end printing operation or data preservation. The only drawback of this file format is the high file size.
RAW: This is the lossless image format offered by the digital camera. Most liked format among the photographers as it provide enough raw information to play around in the post processing. The file size is comparatively high and needs software to open and process which is easily available. Since this file has lots of information, scope of post processing is very high and can result in stunning quality.