Magento by default compress and reduce the quality of uploaded product images. This tips show you how to increase the product image quality.

To adjust this setting open up app/code/core/Mage/Media/Model/File/Image.php and go to around line #168. There, modify the number 80 in line $result = imagejpeg($object->getTmpImage(), $object->getFilePath(true), 80); to a higher number. Note that this is a core hack and will most likely be overwritten during a full Magento upgrade.