According to GD's website, GD is an "ANSI C library for the dynamic creation of images. GD creates PNG and JPEG images, among other formats. GD does not create GIF images. ". It is available as an extension to PHP. Squirrelcart uses GD to handle it's advanced image features.

For more info on GD with PHP, see this URL: http://www.php.net/image

For the official GD site, see this URL: http://www.boutell.com/gd/