The correct answer describes the file format PNG as a small file that is transparent and supports both 24 and 8 bit color depth. PNG files are commonly used for images that require transparency, such as logos or graphics with a transparent background. The file size of PNG images is generally smaller compared to other formats like JPEG, while still maintaining good image quality. Additionally, PNG supports both 24-bit true color and 8-bit indexed color, providing flexibility in terms of color depth.