Why 1 MB comes up
1 MB is useful when a form allows a larger upload but the camera file is 5 MB or more.
What happens to quality
This target usually preserves more of a photograph than the smaller presets. It is a poor match for a tiny icon, where 20 KB or 50 KB is the more relevant goal.
Why some images cannot reach 1 MB without resizing
If the original is already under 1 MB, compression may not make it smaller. The tool tells you when the new file is not an improvement and can keep the original bytes.
WebP is the default output on this page because it is often smaller than JPG and much smaller than a lossless PNG. You can switch the format if the destination requires JPG.