We had lossy RGBA many years ago with JNG (a simple PNG/JPG mashup format), but Mozilla killed the format along with MNG. The reason was that the MNG lib added about 100kB to the installer. They suggested to use Flash instead. (Yes, seriously.)
With JNG those massive parallax websites could be ~1MB instead of ~5MB.
"Minority browser"? What's that supposed to mean? Anything other than Chrome? Or, if we go back a few years, anything other than IE?
In case you didn't know, there are 3 very important browsers: Chrome, Firefox, and IE. Right now, Firefox got around 20%, IE around 30%, and Chrome around 40%.
There are also a few countries where Firefox is the most popular one. For example, in Germany it currently got around 45%.
>a fringe image format
Was PNG any different? People usually don't randomly start to use some image format if it isn't supported by any browser.
Also, ripping two images out of one file and splicing them together requires very little code. In a high-level language it's maybe 50 lines of code. There are many games which do that. It's very simple and it saves typically around 80%.
I don't know why the GP said "minority browser", but to be fair to them, it appears that Mozilla removed MNG and JNG in 2003[1], when that certainly was a fair description of the Mozilla Suite and Phoenix/Firebird/Firefox marketshare.
Interesting to see Hixie in there advocating for MNG (or, rather, for a format with 8-bit alpha and animation that's not Flash).