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Alrighty, let's start off with a bad jpeg. We've all seen then. We all hate them. I got mine from here: (link). It's a wonderful site for bad jpegs and gifs. (I hope you don't mind me using Jasmine. I have a thing for Disney. )
*sheilds eyes in horror*
Lets take it to photoshop.
((On a side note, CorelDraw 9 has some really cool functions. The one I use all the time is CorelCapture. You just hit a a button, and you can take selections from you screen. Very similar to the PrintScreen button, except you can pick selections and it always works. My PrintScreen button has a tendency to suddenly... not work on me. XP))
Play around with these settings. I actually didn't choose the best ones b/c I still had a few discolored pixels when I was done. Just mess around.
Voila. Took less than 30 seconds, actually.
I went a little farther with this picture and made a sig for my friend. I'll throw it in too. It's nothing special, really.