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wordpress knowledgebase - The MEDIA SETTINGS sub-panel is the place you define choices for displaying various media, mainly images, that exist from your MEDIA PANEL within the upper NAVIGATION bar.

WordPress has built-in image reduction. It automatically creates as much as three images of various sizes, (thumbnail, medium and huge) depending on the dimensions in this particular sub-panel and WordPress also saves the first image, so you will have a total of four image sizes saved for each image you upload.