The filesize reduction is I think a reasonable expectation... let's see if I can analogise this...
Consider that a grainy image has millions and millions of individual pixels each with their own colour value... it's grainy after all!
When you run it through Neat-Image you are removing the grain and making the image colours "Smoother", so the number of individually coloured pixels is down and therefore more amenable to JPEG compression.
Hehehe! I'm sure someone far more verbose will have a better explanation for you guys very shortly!
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