The maximum image size allowed is 800x600 so if your images are bigger than that then the IAP software will auto-resize them down and it isn't generous in how it does it.
Some of the "resizing" software you can get/use is also not kind to the photos. Do a search on IAP for "resizing software" and you should get lots of pointers to good software. Sorry I can't help but I use a mac and iPhoto does a wonderful job all by itself. I just select 800 as maximum dimension and medium quality jpeg as output and I get awesome pictures that are usually less than 100KB.
Good luck.
GK
Greg hit it right on... A few notes, for what they're worth.
If you upload an image with max dimensions less than 800x600, the resizer won't touch it. For those unable or unwilling to resize prior to uploading, no problem, but you have to live with what the standard server image tools (GD in this case) provide.
You can't upload a jpg over 100k - the server doesn't attempt to resize, it just rejects your upload.
It's possible to post beautiful photos at 800x600 under 100k, which it why those limits were chosen.
If you want to get around these limits by hosting a photo elsewhere and putting a LINK to it in your post, that's fine. Don't host a huge photo somewhere then put it in image tags, that screws up the thread display and your post may be deleted. Also, if you move or delete a hosted image leaving a broken image or a dead link, your post will probably be deleted.
The best solution is to take good photos, resize correctly to 800x600 under 100K, and post.