We recommend using 24-bit Bitmap files (.bmp). The reason for this is that Bitmaps do not compress when saved. As such you will not lose any quality in your images. Loss of quality can cause your images to blur or dull down in color.
Jpegs (.jpg) can be used with the display as well, but they save at a 80% compression. So you will lose 20% of your image quality when saving a file. This will cause blurring and loss of color saturation.