I have been using LaTeX->PS output profile and the images were included using .eps format (.eps preserves image quality). But, this does not work if you use XeLaTeX profile as it does not support PS outputs.
To include the figures you have to convert them to .pdf format.
To convert your .eps figures into .pdf format you can use the epstopdf executable (it should be already installed by MikTex) by:
The first thing to remember is that a document uses only one class, but it can use many packages.
That means that particular class we use in our document (e.g. myclass.cls) sets the overall format, like the structure of the sections and etc.
A package, however, add more functionality to the document. For example tikz is a package which allows you to draw diagrams, but does not modify the document style at all.
A class file can also be based on another "one" class and multiple packages.