If you don't want to overwrite your input files, use the -ext option. The output files are then named the same as the input files, plus a period and the extension text you specify.
Verbose explanation: Let's say you've got a dozen pixmaps that you want to display on the screen all at the same time. Your screen can only display 256 different colors, but the pixmaps have a total of a thousand or so different colors. For a single pixmap you solve this problem with ppmquant; this script solves it for multiple pixmaps. All it does is concatenate them together into one big pixmap, run ppmquant on that, and then split it up into little pixmaps again.
(Note that another way to solve this problem is to pre-select a set of colors and then use ppmquant's -map option to separately quantize each pixmap to that set.)