JPEG logos are the automatic choice for most artists when a client needs a wordmark in Office. It's the worst possible format.
JPEG seems to be the all-purpose file format where the designer realizes they need to place an image with a smaller file size than a full-scale EPS or TIFF. The JPEG format is fine for photos and photo-like graphics, such as graduated tone areas. But it has 2 things going against it for flat color line art: lossy compression and the RGB color space.
The Disadvantages of JPEG Logos
Lossy compression renders flat color as a pixelated and sharpened hodge-podge where every pixel can be a different variation on the original color. You've all seen this on blowups of low-quality JPEGs where weird textures are introduced to areas that were formerly smoothly shaded. Lossy compression does reduce the size of the file, but at a visual cost. When you're dealing with flat color, this visual cost is all too noticeable.
The other down-side to JPEG is the RGB color space. While admirably suited to photos, it's simply not needed for line art logos. The RGB color space means thousands of color definitions are stored in the file, even for a logo that started as 1 color when it was a happy piece of vector art. This bloats the file size
The net result is a fuzzy, textured logo that is just too big. Then the client wonders why their letterhead template is over a megabyte before they type one word. Instead, let's go back to first principles and figure out how to do this right.
The Alternative to JPEG Logos
The average logo starts life as an Illustrator file colored with one or two colors. How can we keep it as close to that original as possible?
Let's start by throwing out the RGB color space. We don't need millions of colors, we only need a few. Let's use Indexed Color instead. With indexed color, only a few color definitions need to be stored in the file, so the file size goes way down. It goes down so much, that we can now increase the resolution of the image to get better sharpness.
Let's go through it step by step. If you're using Adobe products, it takes 2 steps to get to indexed color. First you have to export the logo from Illustrator as RGB, but to a file format that is not lossy, like TIFF. Then you open the RGB file in PhotoShop and reduce the image to indexed color.
Open a test logo in Illustrator. Start with a one-color version to make life simple. Now use the File>Export command with the following settings:
Save as type: TIFF
(Click on Save)
Color Model: RGB
Resolution: Other 600dpi
Anti-aliasing: Art Optimized (Supersampling) - assuming logo text has been converted to curves.
Check LZW Compression and click on OK
Now open the TIFF in Photoshop. Choose Image>Mode>Indexed Color and the following settings:
Palette: Local (Adaptive)
Dither: None and click on OK
The format to save in depends on which version of Office your client is using (you did ask, didn't you?). GIF format stores more compactly in Office 2003 and earlier. PNG has a smaller file size in Office 2007 and above. The difference is not huge and PNG has the advantage of remembering its resolution, so you could safely just stick with it if you're not sure. GIFs always import into Office under the assumption that they are 72 d.p.i., which means your logo have to be reduced to the correct size after placing in Word or PowerPoint.
The Proof That JPEG Logos Suck
Are you skeptical that it's worth the trouble? Here's an enlargment of a typical artist's result at left versus a Brandwares logo on the right:
Enlargement of a typical artist-supplied 300dpi RGB JPEG.
OK, it's obvious the indexed color image looks way better. But the other benefit is that it's also much a much smaller file size. Typically, the crappy-looking JPEG will be 8 (yes, eight) times larger! I know, file size may not matter to you, but it does to your client. They have to pay for storage for thousands of documents based on your template. The rule of thumb is: if your letterhead is bigger than 100kb, you're doing something wrong. Ours range between 40kb and 90kb.
Enlargement of a Brandwares 600dpi indexed color PNG.
It's not a lot more work to give your client a superior product. Forget JPEG as a logo format, just use it for photos. Indexed color PNGs are the way to go for line art.
March 2017 edit: This article is still relevant if you must use bitmap-format logos. Vector-based logos offer significant advantages, like not getting blurry when image compression is used on the file. Here's the state of the art: Best Quality Logos for Office