Compressed image formats such as JPEG and PNG would require far too much code support to fit practically on to an Arduino; with so few pixels you'd be better off with an uncompressed format like BMP or Netpbm. Support for the latter's images is more common on UNIX-derived systems, but I'm sure you'd be able to find Windows software to open or convert them.
Netpbm's PGM and PPM have ASCII encodings which are incredibly simple
. They're really just text files arranged in particular ways.
BMP is pretty basic but more binary-oriented
- but should open in pretty much anything.