in the attached image, you can see pixlelation/distortion mainly on the red and blue text and red boxes. What causes this and how can I fix it?
The problems you see are compression artifacts. If you want to make them less visible apply less JPEG compression on your Image, this in turn will make the banner larger in size.
Image 1-2: 2 compressed JPG images, the one on the left has more compression (25) that the one on the right (90). But the less compressed image is more than 4 times larger in file size.
Please note that your image may not be optimal for JPEG compression. All other elements, except the car, would benefit much more form a PNG/GIF compression.