While you can still use JPG and PNG images, those formats are STRONGLY discouraged.
Instead, you should use the .dds format with either DXT1 or DXT5 compression.
We recommend ImageMagick for converting. In a terminal, just go:
$ convert image.png image.dds
It's that simple.
So why this new format?
Before, the way a texture image was loaded was this (for a 4k/UHD 3840x2160 image):
1. Load PNG compressed data;
2. Decompress PNG into RAM (using 32MB of RAM)
3. Flip the image vertically on CPU (using another 32MB of RAM).
4. Send this data to the OpenGL Drivers
5. OpenGL drivers compress data into DXT1 or DXT5 using up another 8MB RAM
6. OpenGL drivers write the texture to VRAM
Now the process is shorter:
1. Load DDS image into RAM (using 8MB ram)
2. OpenGL drivers write the pre-compressed texture data directly to VRAM