How the tool reaches 100 KB
WebP has a quality setting like JPEG, so the tool searches it. Your browser decodes the image, redraws it on a canvas and encodes it at a high quality first. If that already fits under 100 KB, the job is finished.
If it does not, the tool halves the remaining range and tries again, then again, closing in on the highest quality that still produces a file under your limit. Eight passes land within a fraction of a percent of the ideal setting, and the whole search takes well under a second.
Because WebP compresses roughly a quarter to a third harder than JPEG, the quality it settles on for a given target is noticeably higher than JPEG would manage at the same size. That is the entire reason to use the format.
Only if even a low quality cannot reach the target does the tool reduce the pixel dimensions, and then it repeats the quality search at the new size.
What compression actually discards
Lossy compression sounds like vandalism until you know what it removes. The format splits the image into small blocks and describes each one as a set of frequency patterns rather than as individual pixels. Broad shapes and gradual tones are kept in detail. Very fine texture and sharp noise are stored coarsely or dropped.
It also records colour at a lower resolution than brightness, because human vision is far more sensitive to light and dark than to hue. None of this is visible at normal viewing size until the quality is pushed low, at which point you start to see block edges around detail, colour bleeding around text, and mottling in flat areas such as a plain background.
The search described above exists to stop just before that point.
WebP, JPG or PNG
The output format is selectable above the results, and the right choice depends on where the image is going rather than on what it looks like.
WebP gives the smallest file for a given quality, roughly a quarter to a third better than JPEG, and it supports transparency. That makes it the best choice for anything served from your own website, where the saving turns directly into a faster Largest Contentful Paint.
JPG is the safe choice for anything you submit to somebody else. Every upload portal, every piece of desktop software and every printer accepts it without argument, which WebP cannot claim.
PNG is for graphics rather than photographs: logos, icons, screenshots and line art, particularly when a transparent background matters and the file has to stay pixel perfect.
If you are not certain the destination accepts WebP, use JPG. The saving is worth having, but not at the cost of a rejected upload.