What is DDS?
DDS is DirectDraw Surface, the texture format games ship. Its point is that the GPU reads the compressed blocks directly, so BC1/BC3 textures never need unpacking at runtime. FileSorcery reads it and converts out; writing good block compression is a job for a dedicated compressor.
What is JPG?
JPEG is the format photographs live in. Its compression is lossy - it discards detail the eye is bad at noticing, and discards a little more every time the file is re-saved - which buys enormous size savings on photographic images and makes a mess of screenshots, logos and text. It has no transparency.