The JPEG image format is a staple of the web. Even before the world wide web became popular, the JPEG format, along with GIF, was the way images were encoded for digital transmission.
Google is set to replace JPEG with something newer and better. While the JPEG has been an immensely valuable technology, it's one that was based off of decades-old tech.
Google's proposed solution is WebP, which is based off of the VP8 codec that the company open sourced earlier this year. Through the use of the modern video codec, Google adapted some of those technologies to the still image format and believe that it has made WebP more efficient with smaller file sizes.
A test, as detailed in the Chromium blog:
While the benefits of a VP8 based image format were clear in theory, we needed to test them in the real world. In order to gauge the effectiveness of our efforts, we randomly picked about 1,000,000 images from the web (mostly JPEGs and some PNGs and GIFs) and re-encoded them to WebP without perceptibly compromising visual quality. This resulted in an average 39% reduction in file size. We expect that developers will achieve in practice even better file size reduction with WebP when starting from an uncompressed image.
With images making up about 65 percent of internet traffic, Google believes that creating a new lossy format to replace JPEG could both lighten the bandwidth load and speed things up considerably.
Check out some of the sample comparison images here. There are notable differences.