Hi Asher,
Erik is saving
jpg files from Elements. These options result in exactly the same image quality, there is no difference in quality at all. A baseline or simple jpg file is a top-to-bottom rendering of the image and it displays in that sequence on the browsers or on viewers. Progressive ones are divided into a range of scans across the whole of the image (i.e. interlaced) and they display the whole image at the beginning (albeit blurred) and keep on loading the remaning portions by means of which the image gets successively sharper until it is fully loaded. The progresive jpg method is not supported by all browsers or viewers out there, so it is safer to use the baseline method, which is universally displayable. The progressive method makes sense for very large images and when one is surfing on a narrowband internet connection.
Erik,
It is quite fine to use the option 1. The image quality is not going to change by this setting.
The IQ is set when you indicate the quality level (usually indicated as x%; 100% being the least possible compression). But beware; jpg is a lossy compression method so the IQ will deteriorate each time you open an image and save it , even if you use the 100% option. That is the reason that if you shoot jpg only, you should:
1) Save the original as your master and never ever touch it. Copy it to a working version.
2) Open the copy version and save it as tif (which is lossless)
3) Do all editing and saving on the tif version
4) For the final output (web, print, etc), you can save the tif version as a jpg file, while keeping the tif version as your master file.
5) Once the output file has been generated as jpg, do not edit and save it anymore.
HTH