How image compression works
This tool redraws your image onto a canvas and re-encodes it as JPEG at the quality level you choose. JPEG compression works by simplifying color detail in ways the eye barely notices at moderate settings, around 70-80% quality usually gives a large size reduction with very little visible difference from the original.
A note on PNG images
PNGs with transparency will lose that transparency when compressed to JPEG, since JPEG doesn't support it. The transparent areas will be filled with white. If you need to keep transparency, this tool isn't the right fit, try the Image Resizer instead, which preserves the original format.