Whoa, what? Avatars are converted from png or jpg to gif?

Why is that the case?

They're not converted. The extension is just changed, likely to keep the naming structure consistant.

You will notice if you save the avatar and open it, your program will usually (at least Irfanview does) tell you the file type is incorrect.

What does the extension do to the naming structure? Is it just for ease of referring to everything, like with a wildcard or something?

*confused*

Well, yes. The avatar filename is always
avatar[member number]_[avatar number].gif

If it kept the original extensions, that would be one more thing the system would have to keep track of. It simplifies things by making all avatars ".gif".