Images are optimized by reducing the file size via:
A. reducing the resolution of the image (effectively maintaining the physical dimension while spreading out the pixels), usually measured in dpi (dots per inch) or ppi (pixels per inch) here in the US, and
B. reducing the number of colors in the image so that less information has to be stored per pixel (know as "color depth"),
both while trying to maintain reasonable on-screen and printed quality.
As mentioned, programs like Fireworks, ImageReady, and Photoshop all allow you to see the before-and-after versions of your image in a multi-up format so you can easily compare the effects of the reduction.
If you own the Acrobat application (not Acrobat Reader), you can have it optimize the images for you after they're already in the PDF document. Otherwise you have to optimize them outside your editing application, import them into your layout, and then save as PDF.