DJVU

The main site for information on DJVU compression format for ebooks is here http://www.djvuzone.org/

In a nutshell, DJVU was invented to solve this problem:

Conventional web formats such as JPEG, GIF, and PNG produce prohibitively large image files at decent resolution. As a result, Web site content developers have been largely unable to leverage existing printed materials.

DJVU is intended to be used with scanned images of book pages, either black & white or full color. It then compresses those scanned pages to produce very highly compressed files.

Given that the target countries for the OLPC have poorly developed computing infrastructures, scanning of existing printed documents into DJVU format may be the fastest way of making a wide variety of educational material available to the kids.

If you want to contribute to the DJVU project in any way, here is the site: http://djvulibre.djvuzone.org/