Public Images (formerly known as Public Assets or the Image Repository) is intended to hold images that will be displayed on the site. It is not meant to hold images in an Intranet-like fashion (all images are intended to be public-facing). Images that are stored on the site but not meant to be seen by the public will need to be stored in Document Center folders or on some other shared drive.
When images are uploaded to Public Images, files are compressed using an image compression algorithm to attempt to reduce their file size. This algorithm can reduce image size by about 90%.