JPEG images ARE just binary streams. You can encode them to various ASCII/text type encodings, but all of those will increase the size of the resulting string/stream/file. You could transform the image to some pure-text image format, like XPM, but for typical JPEGs that will increase the size a lot more than a simple base64-type encoding of the original JPEG data.

Bottom line: use "raw" binary strings when dealing with inherently binary data, unless you really need some encoding (for instance, when mailing the data or encapsulating it in an XML file).

update: Postgres does have facilities for dealing with binary data directly. So read the docs for the right module.