(Note: I've been wrapped up in jury duty, on a case that is projected to go into mid-December, so posts will be few and far between as you can see)
Many people wonder what the big deal is with RAW image files and what they are. In the realm of digital photography, cameras themselves generally will save images in one of two formats—JPEG or RAW.
Most consumer compact cameras only save images in the JPEG format. These images take up less space on the memory card and because of this you can get a lot more pictures on a card than you can with RAW. But, there is a reason...the JPEG file has been compressed by discarding a lot of the information that the camera's sensor recorded.
A camera normally has 3-4 different settings to control the "quality" of the image that is saved in the JPEG file. The highest quality setting compresses the information less than the lowest quality setting. But even at the highest quality setting, the file is often compressed to only 25% of its original size (a 1:4 ratio). What this means is that even at that "high quality" setting, 75% of the information recorded by the camera sensor is discarded when the file is saved.
The information that is discarded is what a lot of research determined is not crucial to our brains interpreting what the image looks like when viewed. That original JPEG file out of the camera is more than good enough. Set the camera to a lower quality and things can start to get dicey.
A RAW file saves all of the information recorded by the camera sensor. Nothing is discarded. Because of this, images saved in RAW format have more for the imaging software on the computer at home to work with and provide for more opportunity to fix exposure or color balance problems in the original exposure. One drawback is that each camera manufacturer has their own version of RAW file—unlike JPEG which is always the same regardless of manufacturer. The RAW file itself cannot be directly changed after the fact (without a lot of mysterious data manipulation), and that provides the means to always have the original image. When a RAW file is processed on the computer and saved, a new JPEG (or Photoshop or TIFF) file is created.
That is another advantage of RAW files. When a JPEG file is edited on the computer it will alter the original image file if you "Save" the changes. You must "Save As" and give it a new file name in order to preserve the original. When you "Save" a RAW file the software is doing this for you automatically. And, every time you save (even Save As) a JPEG file, that compression is being applied again. After 3-4 saves of a JPEG, what started out looking pretty good becomes something that looks like it was drawn with crayons.
If you are using a camera that only saves its images in JPEG format, and you like to manipulate them in creative ways on the computer, it is best to save the resulting image in a format that doesn't do any additional compression. Those formats are TIFF and, in the case of Photoshop or other dedicated image editing software, their proprietary format. These files can be reopened, changed, and saved over and over again with no degradation since they don't compress the image information.