Resolution explained (pixels, DPI, inches)
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When dealing with graphics files there are 3 properties that go into determining the resolution of a file.

Pixels: The exact number of 'dots' both horizontally and vertically that make up the file. This is the actual resolution of the file. DPI and Inches affect only the size of the image as it is displayed or printed, but the actual pixels is finite in a bitmapped file.

DPI (Dots per inch): The number of 'dots' or pixels per each inch of a printed or scanned document.

Inches: The actual size (either printed or scanned) of an image.

These three parameters have direct effect on one another. With any 2 of the parameters known a simple mathmatical formula will give you the third. Let's look at a simple example:

An image created in Photoshop at 300 x 300 (that's 300 pixels wide by 300 pixels high) with a DPI of 100 is exactly 3" x 3". 

Inches = Pixels/DPI
                300 / 100 = 3

If you look at the Image Size Menu in Photoshop you can see a little easier how these relate.

Notice the Resample Image check box. This determines whether you want to actually resize the image. With this box UNchecked, when you enter a new DPI, Photoshop will automatically change the DPI to compensate and vice-versa.

DPI = Resolution A common mistake
Many people think DPI is all that matters. They couldn't be more wrong! A person creating graphics for print often says "I need it at 300 DPI." That really doesn't tell us much. For example, if I am scanning something for that person that is 2" x 2" and I scan at 300 DPI, I will get an image that is 600 x 600 pixels. If my original was 8" x 10", I will get a result of 2400 x 3000 pixels. That is quite a difference in both resolution AND FILE SIZE. What else is missing here. Well, it doesn't really matter what the original size of the image is (in inches), what matters is what the size of the output will be. So if the person asking for 300 DPI also added that this image (when printed) will be 2" by 2", then we can do the math! We know know that they want a final resolution of 600 x 600 pixels! We can do the math when we scan based on the size of the original, or scan at a high enough resolution and resize it in Photoshop (or any graphics program).

How does this relate to PowerPoint?
Well that's where it get's a little tricky, because PowerPoint does not really give the user an option to set the DPI, although the format of the presentation File | Page Setup is done in inches. Moreover, Powerpoint actually changes (behind the scenes) the DPI it is working in based on the PowerPoint version and your Windows display setting (i.e. small fonts or large fonts). This has really nothing to do wiht what resolution you have set-up in slide show settings and therefore your images rarely are imported at the correct size.

Moreover, there are issues with the file types being imported. JPG files will sometimes have the DPI and inches in them, GIF's will ONLY have the pixel information, and PNGs will ALWAYS (when exported from Photoshop) change the DPI to 72 no matter what resolution you were working in with Photoshop.

If you are creating for an on-screen presentation only the ONLY thing that really matters is the Slide Show Resolution shown here in the Slide Show | Set Up Show Pull-down menu. 

This is the resolution that you will be playing back in. In many cases, this is set to 1024 x 768. So if you create all your photoshop files at 1024 x 768 you are creating exactly what you want played back. BUT, I'm sure many have noticed that when you export an image from photoshop as a JPG, PNG, etc... and insert them into PowerPoint, they are still not sized correctly. This is where pptXTREME's comes in!

If your PowerPoint page setup is at the default of 10" x 7.5" and you are creating a show to be played back at 1024 x 768... then, once again, it is simple math. 1024 / 10 = 102.4 DPI - Ditto for the Height. So in the pptXTREME DPI setting set the DPI to 102.4. 

Now the images imported and exported using any pptXTREME software, will first look at the actual pixels being imported, adjust based on your DPI setting and BINGO they are imported (and exported) at the correct size.