there are five ways to reduce the size of the file:
- reduce the size of the image
- reduce the resolution of the image (although that often reduces the size as well)
- change the format of the image (such as from TIF to JPG)
- increase the compress of the image if it is of a type like JPG
- crop the image to remove extraneous stuff and that reduces the size of the picture

The format/dpi/size is the easy one. if you do a "file, save for web" it will ensure that the picture is at 96DPI (no matter the size) and that same screen will allow you to change the format. Check the box where it says either JPEG or GIF and select JPEG (GIFS are good for certain things such as having a transparent background or animated). Then on the JPG screen you can also change the size of the phone in the height/width box. If you set the aspect ratio the same its a matter of changing either the height or width and the corresponding number will change. try something in the area of 200-250 for small.

The box also has a slider and drop-down for compression. Choose Medium (40-50) and it wont lose much clarity at all.