JPEG 2000 is a file format that provides more options and greater flexibility than the standard JPEG (JPG) format. Using JPEG 2000, you can produce images with better compression and quality for both web and print publishing. To save files in the JPEG 2000 format, you must locate the optional JPEG 2000 plug‑in and install it in this location: Adobe Photoshop CS3/Plug‑Ins/File Formats. You can find the plug‑in on the Photoshop CS3 installation CD in Goodies/Optional Plug‑Ins/File Formats.

Unlike traditional JPEG files, which are lossy, the JPEG 2000 format supports optional lossless compression. The JPEG 2000 format also supports 16‑bit color or grayscale files and 8‑bit transparency, and it can retain alpha channels and spot channels. Grayscale, RGB, CMYK, and Lab are the only modes supported by the JPEG 2000 format.

The JPEG 2000 format also supports using a region of interest (ROI) to minimize file size and preserve quality in critical regions of an image. By using an alpha channel, you can specify the area (ROI) where the most detail should be preserved, allowing greater compression and less detail in other regions.