yep, big difference between bmp and jpg quality when you're using paint. Make a 300x100 turquoise image and put some black text on there, save it as a jpeg and reopen it, it will have distortions in the color around the text, zoom in closer to see it better.
NOTE: Photoshop is an exception. When you export an image as a jpeg in photoshop, you can select a quality, 1-12 12=best. Pretty much anything above 6 or 7 is going to be identical to the original image (no distortion or "blurryness") although it will be a larger file. You can export it as a quality 1 and it will look like you saved it from MS Paint (total crap) but at least it will be a small file... Not to mention that Photoshop can utilize anti-aliasing on almost every feature including text.
[EDIT] Example added below, Enlarged for your viewing pleasure ^_^
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