Atlassian made the decision to revert to the GIF format for user profile pictures due to Microsoft Internet Explorer's broken PNG handling in IE6. Therefore, a user can upload a PNG, or a previous user who had a PNG can still link to it if it is present in the profile picture directory, but Confluence will NOT find PNGs in the directory and offer them to users to select.

I think this is a bit short sighted. IE6 is only one of several browsers. PNG is a far superior format to GIF - converting PNG icons to GIF results in very dithered and pixelated images. Also, the only IE6 issue was with PNG transparency... I think whatever is in the directory should be offered to the user - GIF, PNG, JPG, whatever - as long as it's a valid image and meets the size criteria.

I had to convert about 100 PNGs to GIFs, and as a result, had uglier icons.