This is an issue with exporting jpg’s from Photoshop CS2/CS3. Even though viewing the jpg alone in a picture viewer did not show any horizontal lines when used as a background-image on a site it showed horizontal lines every 10-20 pixels repeatedly. The even stranger thing is this is only visible in firefox. You cant see the lines in IE6,IE7, Safari,Chrome!

I had to re-save the jpg in fireworks to fix the problem. Without a doubt the strangest bug I have ever encoutered.