Windows Media Photo is a new file format for continuous-tone still images that surpasses the limitations of existing image formats. Windows Media Photo supports a wide range of features including:

• Multiple color formats for display or print
• Fixed or floating point high dynamic range image encoding
• Lossless or high quality lossy compression
• Extremely efficient decoding for multiple resolutions and sub-regions
• Minimal overhead for format conversion or transformations during decode

Windows Media Photo delivers a lightweight, high performance algorithm with a small memory footprint that enables practical, in-device encoding and decoding.

This version of the specification is based on the implementation of the Windows Media Photo codec that is currently shipping with Windows Vista Beta 2 and the WinFX Runtime Components Beta 2. Future updates to the specification will be posted here when they become available.

Here are MS's "Objectives for Introducing a New Still Image Format"

• High performance, embedded system friendly compression
• Small memory footprint
• Simple, integer-only operations (no divides)
• Industry-leading compression quality
• Lossless or lossy compression using the same algorithm
• Support a very wide range of pixel formats:
• Monochrome, RGB, CMYK or n-Channel image representation
• 8 or 16-bit unsigned integer
• 16 or 32-bit signed integer
• 16 or 32-bit floating point
• Several packed bit formats
• 1bpc monochrome
• 5 or 10bpc RGB
• RGBE Radiance
• Simple, extensible TIFF-like container structure
• Planar or interleaved alpha channel
• Embedded ICC Profile
• EXIF and XMP metadata

More info http://www.microsoft.com/whdc/xps/wmphoto.mspx