All avatars on this site are turned to a JPEG. If you could allow PNG file format with transparency I would jump for joy. Any transparency turns the entire image black after upload because of the JPEG reformat. Secondly, the increase in JPEG artifacts is like a redneck with a car on his front lawn. It de-beautifies the rest of the site. I move for allowing PNG file format with transparency. It's a smaller filesize and higher quality.

PNG: http://en.wikipedia.org/wiki/Portable_Network_Graphics
JPEG: http://en.wikipedia.org/wiki/Jpeg
Comparison: http://www.sph.sc.edu/comd/rorden/graphics.html

As you can see, PNG is a lossless compression. It's usually smaller than GIF in filesize (and sometimes JPEG), and is patent-free. Rarely will you come across an old enough browser to not support this file format.
Browsers that support PNG: http://en.wikipedia.org/wiki/Comparison_of_web_browsers#Image_format_support

So, benefits..

Smaller file size then GIF, and sometimes even JPEG. Lossless, so the file looks sharper, looks less junky. Supports transparency, so thumbnails look slick (and damn can they look slick). Melts in your mouth, not in your hand.

Yay or nay? Comments? Rebuttals? Support?