To answer your question: it would be more convenient to show the smaller file size image with thumb dimensions provided the images are clear enough. What some do is post the thumbnails to show and then also have the full size available if the visitor clicks on it.
There are basically 3 image file types in common use on websites, namely jpg, png, and gif. If the image has any text written on it gif is the recommended format to use. It preserves clarity with textual content. If you need transparency in the image such in the case of a logo with no background, png is the better choice. Finally, if the image is a photograph, jpg is the best choice as it can compress in file size without losing resolution and clarity.
Regardless of which scenario you are in and regardless of which file type you pic I recommend you format the file to the correct size before posting it to the website so that the browser does not need to modify the size to make it fit. The closer you can make it to the correct size (dimensions) and the smaller you can make it in file size, the better and faster it will be for the visitor.