A hash is a mathematical function that maps a large number to a much smaller number. Files can be considered numbers; graphics files are certainly amenable to that.
For example, an MD5 hash is always 128 bits long. You can feed any file to an MD5 hash generator, and the same file will always produce the same resulting hash. However, each hash could correspond to many different files.
If you are looking for duplicate files, you could construct a hash for each file and then only check the files which have the same hash.
All of the methods described in this program's interface are hash functions.
If you don't care particularly, MD5 tends to be pretty fast to generate.
If you have a preference for which kind of hash to generate, you can select it here. Most people won't have much preference.
There are situations in which the kind of hash makes a difference -- this does not appear to be one of them.