If you display your image at a specified size but don't actually resize the images themselves, your visitors are still download the images at the actual file size.
example: you have in your settings to display all thumbnails at 150 pixels wide but the actual file size is 1MB. when someone visits your website there browser will still have to download the 1MB file even if it is only displayed at 150 pixels wide. so if you have twenty products on a page and all of your images are 1MB in size. your visitors will need to download 20MB of images to display the page.
The best solution is to resize all of your images before you upload them (optimizing your website) your pages will load very quickly and take up less space.
Here is a great program for resizing your images (Free) http://www.pappashop.com/whmcs/downloads.php
