Thumbnail image format settings
To view or update the thumbnail image format settings go to the Options step, select the Thumbnails tab and click the Thumbnail image format.. button. It opens the Image format settings window.

All thumbnail images in the gallery are saved in the JPEG format.
You can change the JPEG quality to make your thumbnail image files less in size with low quality of the image, or bigger size but with higher image quality. It is recommended to keep this value in 75-95 range.
The Resize filter determines the way images are resized. The speed of resizing and the quality of the resized image depend greatly on the filter you choose.
See also
How to add a border to the thumbnail images, How to change the thumbnail image size, Thumbnail resize methods explained