OK.
If you are cropping an image (
http://en.wikipedia.org/wiki/Cropping_(image)) then you are not reducing the quality of that area, but you ARE reducing the total size of the image.
Lets say, for example, you have a 12 megapixel camera. If you take a photo then it is made up of 12 million pixels. If you only want the bottom left quarter of the photo and crop the rest out, then you're basically throwing away three quarters of your picture, leaving you with the original 3 million pixels in that one quarter. Obviously this results in a smaller file size.
If, ont he other hand you want to preserve the whole image but reduce its size you want to re-size the image, not crop it.
Many digital cameras default to taking photos at 72 pixels per inch (ppi), leading to images which appear to be metres wide wide. To reduce to a 5x7 print, what you want to do is this:
Change the image size properties so that the dimensions are the same BUT then INCREASE the resolution (ppi value) until the file size is close to the same as the original. Be careful however; you have to perform both these steps at the same time, then press OK. If you do one, press OK, then change the resolution what you will have done is discarded loads of pixels, then asked the programme to just insert new pixels. All it will do is blur out your image.
300 ppi is about normal for print quality. If you're saving for the web or digital photo frames you only need 72 ppi