There's something really fishy about the "balloon" example in the paper. Allegedly it's a 512x512 image, but if you look at it it's plainly 64x64. (If I view the article using Firefox's pdf.js, then it's upscaled in some kinda-smooth way; if I open it in a dedicated PDF viewer then the big pixels are clearly visible.) And then the fractally-compressed-and-decompressed images have miraculously created detail that wasn't there before, and have smoothed out the blocky edges of the balloon (for instance) into nice high-resolution smooth curves.
If it really did that, then it would be badly wrong because for all the compressor knows it's destroying lots of useful information by rounding off all the corners. And it would be miraculous because what it's actually done turns out to make something physically plausible, when there are any number of ways of filling in the missing detail that fit the data in the 64x64 image equally well, as far as anything short of full AI could tell.
But I don't really believe it did really do that, because (1) from Barnsley's description of the algorithm it seems fantastically unlikely that it could, (2) the paper says explicitly that the original and reconstructed images are both 512x512 pixels, and (3) if fractal compression were really doing something so miraculous then Barnsley's article would have made a lot more noise about it (and in particular the discussion of "fractal zoom" that follows wouldn't make any sense if Barnsley thought he had just showed a spectacular 8x fractal zoom already).
I'm guessing that something very bad happened to Figure 2, and that the image that was actually compressed and decompressed to produce Figure 3 looked a lot more like Figure 3 than it did like Figure 2 as shown in the paper.