Hi,
Here is how image optimization works.
1) “Optimize Original Images” is simply the switch for image optimization to go on/off. When switched ON, optimized JPG and PNG versions of the original images are created and stored; otherwise, image optimization will not happen at all.
2) “Image WebP Replacement” tells the system to use the WebP versions of the optimized images wherever possible. BUT, it only works when WebP versions exist. AND, WebP versions are not created by default. You must turn ON “Create WebP Versions” to have WebP images created together with the optimized JPG/PNG images. VERY IMPORTANT to note: if you turn ON “Create WebP Versions” after you’ve already had your original images optimized, the system DOES NOT revisit each optimized image to create its WebP version. The WebP verions are only created in the process of original images are being optimized.
Hope everything is clarified for you.
Regards.