There are two functions you can call for encoding UIImages on the iPhone -- UIImageJPEGRepresentation and UIImagePNGRepresentation. For my app, I was curious about the performance of the two image formats. I ran some tests on JPEG with various compression qualities, PNG, and Simulator vs iPhone 3G on 2.1.
The image tested was a 320x416 image (about 120k JPG @ max quality) of line drawing, repeated 10 times for each scenario and averaged. For the writing tests, the images were encoded and then written to disk. For the reading tests, the image is read and then drawn to an offscreen bitmap to make sure the bytes were actually read off the drive.
Note that q=0.0 is max compression, min quality; and q=1.0 is min compression, max quality.
jpg, q=0.000000, 0.018185 seconds avg
jpg, q=1.000000, 0.017662 seconds avg
png, 0.034456 seconds avg
jpg @ q=0.000000, 0.005052 seconds avg
jpg @ q=1.000000, 0.000838 seconds avg
png, 0.021330 seconds avg
iPhone 3G 2.1 Writing
jpg, q=0.000000, 0.255950 seconds avg
jpg, q=1.000000, 0.265089 seconds avg
png, 0.592170 seconds avg
iPhone 3G 2.1 Reading
jpg @ q=0.000000, 0.138772 seconds avg
jpg @ q=1.000000, 0.049013 seconds avg
png, 0.065347 seconds avg
In this test scenario, JPG writing is about 2.3 times faster than PNG writing on the 3G regardless of quality. On the flip side, JPG reading at max quality is 1.3x faster than PNG, but 2.1x SLOWER than PNG at max compression.
So if we take the best quality comparison, JPG is 2x faster to write and 1.3x faster to read. You'll have to compare image quality in your particular case, but JPG seems to win hands-down for me.
You can also look at the comparisons between iPhone and Simulator and prove to yourself that you should definitely not use the simulator to judge anything about runtime performance of your app on the real device, which I don't guess anyone REALLY had to tell you.