Lossy is when you reduce the size of a file and doing this, the quality of the file will be weakened because some of the file's information is automatically thrown away.
(PNG file) (JPEG image)
If you look at the image of the dog on the left, the quality is good, but the file size is 60.1 KB. However if you look at the image of the dog on the right, the quality is bad, but the file size is 1.14 KB.
(JPEG image 2)
JPEG image 2 is only 4.82 KB in size, but the picture's quality is almost similar to the PNG file. This is because the human eye can't pick up all the pixels. You can reduce the size a lot and the quality will be okay, but not too much because it will look like JPEG image 1. JPEG image 2 is okay because it's a lot smaller in size which will save space and the lower quality won't be that noticeable to the human eye. Reduce the image too much, it won't be any good and once it's thrown away all the information, you can't get it back again.
What is lossless?
Lossless is taking the image and reconstructing it, making it smaller, but keeping it identical to the original. When you re size the image back to its original size, the quality of the image will go back to the original quality because it never lost any of its data / colouring.
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