It is not recommended that you edit and save a JPEG file more than
once - it loses quality each time it's resaved no matter how high your
compression ratio is. Work on your image in Photoshop, save a copy as
PSD or TIFF, and a second one as a JPEG.
JPEG does work well for photographic images, but does not work for
images less than 24-bit. As a general rule you may consider using GIF
for line art, illustrations and such, and JPEG for photo-type images.