A co-worker and I got into a discussion about color management in Photoshop, a long-standing source of frustration for web designers. He took it upon himself to research it and just sent out an email to our team here at work. Hope this helps some of you who have been wading around in the dark for too long.

From Brian’s email:
I recently discovered a solution to a long standing issue I’ve had with on-screen colors in Photoshop not matching save for web colors, when Color Settings (shift-command-K) are set for North America Web/Internet or North America General Purpose (I believe the later is the default on install). They are generally darker (depending on the profile in the file), before saving for web, unless you do one of the following, but each method has issues:1) Use Color Setting of Monitor:- benefit: colors match what you see on the web while you’re working on your file- problem: when you go to save for web in Photoshop, the colors will go unnaturally lighter (even more so than if your color settings were for web or general purpose). NOTE: This doesn’t happen if you use Fireworks for optimization (the monitor/web color space is preserved).

2) Use color settings of North America Web/Internet or North America General Purpose, but “proof” the file for web colors using a Monitor RGB proof setup:- by selecting View/Proof Setup/Monitor RGB and then Proof Colors (command-Y) you will see your web comp shift to lighter colors - how it will actually look on the web on your monitor. If you want to view your file as you would see it on the web while you’re working on it, you have to remember to do this for every file you open that has an sRGB profile (web/internet) or general purpose. It is only a viewing preference on a per file basis (not saved). It has to be applied to all of the files you may have open one by one, to view them as they would appear on the web.

I found the following piece of information on the Adobe website i never really thought about:

“Photoshop is a color-managed application. The Web is not. Normally, when you view an image in Save for Web or ImageReady you are viewing it without color management and see it how it will appear when uploaded to the Web.”

However, there is a third ideal solution I have just found and that I now use. It uses solution number one (above), but removes the issue of the colors going even lighter then normal, when using Photshop’s save for web. A simple item unchecked in Save for Web (Convert to SRGB) keeps your viewing color consistent while working on the file using a Monitor viewing preference, all the way up to the save state. You only have to set this once.

Read the following simple instructions on this site.