You are being unfair to yourself in stating that it is not a PC question - in actual fact it is...:-)
With a 4MP camera even using the lowest resolution setting is probably better than most 1.3 or 2MP cameras on the market at their maximum resolution.
To compress a pic file just rename it (you can use the same file name if you wish) and add .jpeg; for example Jodie.jpeg.
The quality will be more than suitable for use on a website or for e-mailing to friends etc.
Your normal 4MP shots will have resolution that is far superior to what you are likely to use on your monitor, so compressing the files is not likely to be noticed on the screen unless you compress them very substantially.