To reduce the overall file size of your PowerPoint 2007 presentation it is important to compress all the graphics you have placed in the presentation like pictures taken with your digital camera or found on the Internet. To do so:
Select a picture by clicking it in PowerPoint 2007.
Click the Picture Tools tab that appears at the top of your screen.
Click Compress Pictures in the Adjust box at the top left of your screen.
A Compress Pictures dialog box will appear. Click OK and all pictures in your presentation will be compressed.
You will notice that there is an Options... button in the Compress Pictures dialog. Using it will allow for setting compress screen resolution (the default is 150 pixels per inch ("ppi"), which will work fine with use with classroom digital projectors.
Click the following link for a screencast (flash) that will explain in greater detail how to do this:
http://www.palomar.edu/atrc/Training/PowerPoint/PhotoCompress/