Keep PNG for logos, icons, UI with sharp edges and anything that needs transparency in a place that doesn't support WebP. The tool then lowers the pixel dimensions until the file fits your cap.
Convert to WebP for screenshots, graphics and photos with transparency: it keeps the alpha channel and is usually 5 to 10 times smaller than PNG at the same look. Convert to JPG for photographs saved as PNG by mistake; there is no transparency but the file drops dramatically.
Change the output format under More options.