I've actually started using this method, and it seems to work pretty well. It reduces file sizes significantly and yet the quality is fairly good. If you pay attention, you can see some quality loss/artifacts, though it's not bad.
Scroll down to the "Now is the Future" blog post. The cover image of the Seattle skyline is 1700x666 and ~65kb (though, it's been recompressed into WebP by mod_pagespeed if your browser supports it). The JPG (before WebP conversion) is ~88kb.
To see it without the recompression and turn mod_pagespeed off, you can look at the image on the page:
An example:
http://www.andrewmunsell.com/blog/
Scroll down to the "Now is the Future" blog post. The cover image of the Seattle skyline is 1700x666 and ~65kb (though, it's been recompressed into WebP by mod_pagespeed if your browser supports it). The JPG (before WebP conversion) is ~88kb.
To see it without the recompression and turn mod_pagespeed off, you can look at the image on the page:
http://www.andrewmunsell.com/blog/?ModPagespeed=off