A screenshot taken in-game, using F1 to hide the GUI.
Screenshots are images taken in-game by pressing the F2 key. They can be found in the screenshots folder of the .minecraft directory, which is found by pressing "options" in the Minecraft launcher. Screenshots save as a PNG file with the following format: YYYY-MM-DD_HH.MM.SS.png, for example: 2011-02-12.25.05.png, which translates to February 12, 2011, 12:25:05. The screenshot will save exactly what it looks like in-game, so if you press F1 then F2, all of the GUI will be hidden in the screenshot.
Huge Screenshots
When holding shift while taking a screenshot, a huge screenshot will be saved as a TGA file, and the huge image will be 36450 long by 17700 high. With this extremely detailed image, you can zoom in quite far without losing detail. Usually, a lack of RAM make most image viewers crash when trying to open the image. It is not recommended to open a huge screenshot with low amounts of RAM. The output image will usually be around 1.8 gigabytes, meaning that with 2 gigabytes of RAM, opening the image will usually fail. When taking the screenshot, it will store the data immediately to the Hard Drive, rather than keeping it on the RAM until it is finished. Some people have still had Minecraft crash while taking these screenshots, so it is not recommended to take a huge screenshot without making a backup first.