Optimizing your images is a way to shave excess weight off your web page. Because screen displays can only render 72 dpi, there is no reason to save your images with higher resolutions.
In addition, using inappropriate file formats can also unnecessarily pile on the bytes. Use JPEG formats for photos or images with gradients, and use GIF formats for simple line art where you can include only the colors used by the image.
As a rule of thumb, try to keep images under 500 pixels wide or 500 pixels tall. If you are using a 3-column template, you'll need to keep the image under 450 pixels wide to avoid breaking the layout. Most images look fine at 250 or 300 pixels wide or tall. If it is necessary to have a higher resolution image in a larger size, provide a link to the image and include the file size in parentheses.
If you do not have software for editing images for the web (preferably Fireworks or Photoshop), Web Services can assist you in optimizing your images.