After pasting a screenshot into the Screenshot applet and attaching it to an Issue, the captured screenshot is converted from raw bitmap to lossy JPEG. JPEG is not an appropriate format for storing screen captures - as it is a lossy format it usually introduces slight distortion to images; it also is not very efficient (in terms of storage space) for typical screen captures.
I would highly recommend using PNG format for screen captures. PNG is lossless (no distortion - the image looks as it should), has much better compression ratio than JPG - approx. 7x) and is completely free format.
I am attaching an example of both JPG and PNG for comparison.