can anyone please help me to understand what is image optimization?
It can have two meanings.
1) You can optimize images for the web by making them smaller so that they will download and display in a browser faster. Page load times are now affecting Google rankings, so optimizing images for the web can be important. JPEGs are a great example. You can usually compress a JPEG to 65-70% of it's original quality and it still look good in a browser, yet it will be MUCH smaller.
2) The other definition of image optimization is as previous posters have stated... optimizing images so that they rank well in image search.