Most of the time you will use Set to color or Edit KitKat/Lollipop/Marshmallow image, but there are exceptions. For example, the gradient status bar is a nine-patch image by default. You might want to customize it and use a standard PNG instead. To achieve this, you use Edit as PNG or Pick image.
In general, we recommend that you use one of the Edit as options over Pick image when possible. There are two reasons for this. First, the Edit as options limits the size of the created images to values within the accepted size range so you don’t accidentally spend time working on an image that is either too large or too small. Also, the Edit as options will place the files correctly in the project folder structure for you. This may not seem very important when starting out, but proper file organization makes things much easier when you have several hundred images in your theme.
Sometimes you might see the following alternatives as well: