You don't have to have your sigs set that low typically, but for screenshots its DEFINATELY adviseable.
The reason is this:
If you make your file in Photoshop and save at 8 - then you can see the size of it whilst saving. Have a look when you exit. Typically a 800 x 600 size will come in at around 250kb or so. Using a low setting will make it smaller, ALOT smaller.
If you use paint though, you cannot, and that is honest - CANNOT see the difference between the two files. However, saving a JPEG in paint makes that same file around 50Kb instead. I always edit my pics in photoshop (see my website for the screenshot section), but ALL of the files are then opened and saved in Paint, as their size is MUCH smaller than photoshop.
The main reason is that when you get a broadband user, we can see those pics in a few seconds, BUT a 56ker will need around about 8 seconds to see a 50Kb image, but nearly 40seconds to see a 250Kb one. When you start getting multiple pics in threads, soon enough you have a thread that is ONE MEGABYTE in size. I recently found this in the Excelcia thread in mod announcements, where it took about 20 seconds for me to see all pics - as they had 1.1 meg of pictures on there. For a 56k modem (majority of visitors), that would take several minutes!
I have a large amount of bandwidth as well, so size isn't really that much of an issue from personal bandwidth, but it might be for those of you whom use a free host! Furthermore, with the amount of members here, and the downloads already, as well as the screenshots section, adding to it by plonking 1meg of pictures in threads is, well, inconsiderate when you can have exactly the same, but 1/5th of the size.
My final point is that:
Everyone loves to look at images, BUT they take up alot of "screensize" - especially when they don't fit the thread, so it causes the need for scroll - which then affects the text of the thread too!.
Its much neater to use a thumb image instead. This gives the users the option to look at the pic if they like, without having it "forced" upon them. It also saves your personal bandwidth, as if all don't want to see it, they don't have to click on it to see the full size version.
Overall - its just more considerate - think of the 56kers, and think about other members having to look through lots of pics. I have posted "guidelines" in the announcements (mod) forums, so that we don't have a repeat of the 1.1meg pics. You can make mini "galleries" in threads, which looks alot smarter, and gives others the chance to CHOOSE what they see