Most Digital Cameras have at least two formats in which they store your pictures,
JPG and,
RAW. On my Camera, the individual image files look like
'img02034.JPG'.
The difference between JPG, and RAW, is not really important to the average user. But if you're into some serious, maybe professional Photography, or image manipulation (Graphic Artist), then it becomes more important.
Most Cameras are set to JPG at the factory, and most users probably would never even discover the other option.
A RAW file is just that, RAW data, unaltered in any way. It is equivalent to a BMP (Bitmap) file on the computer. In regard to your photo image, it is the best quality that photo will ever be. The key element to remember, is that RAW is
unaltered. It'll make more sense when we look at JPG files.
JPG files are popular, because they're far smaller than 'normal' image files, and you can zip them around the Internet easily. But there is a trade off for this small size. You lose quality in the image. It's referred to as 'lossy compression. That image data is 'compressed' within the JPG file.
Now this is a very simplistic example, but it will show the basic principle. Imagine this is one line of 12 pixels across your image. Your image data comes through as such:
Black, Black, Black, Black, Grey, Grey, Grey, White, White, Grey, Black, Black.
The Compression Algorithm will round out the values, giving:
Black, Black, Black, Black, Black, Black, White, White, White, White, Black, Black,
Your data is then stored as:
6 Black, 4 White, 2 Black.
Obviously it's more complicated than that, but read it out loud, you'll get a feel for what's going on. Now for some pictorial examples. This image here is one of Mikes. This is exactly as he posted it here. It is a JPG file of size 84kb.
Now I've put that image through my usual treatment, it's been slightly cropped, and run though the JPG compression again. It's now only 35kb in size, and looks just as good, quality wise. Or does it?
Here's a split shot. On the left, Mikes original. On the right, the image after going through the JPG compression an additional 5 times. It may take you a moment to see it, but the image is blurring and smudging. Magnify it on your screen if you can, it'll really be noticeable.
So that's how JPG's work. And remember the RAW file? It's bigger, but it's crisp. Usually utilised by professionals, but if you're keen, and into Image Manipulation, it's the best starting point. If you are taking pictures for large poster format, consider RAW.
And here's a critical tip for Photo Editing - every time you open a JPG file to edit, and save your changes, you are slowly destroying your image. Look back at the example, when you open the JPG and extract 6 Black, 4 White, 2 Black, you just get the Blacks and Whites. No Greys. They're gone forever!
I always save my work as a BMP, before I save the JPG. That allows me to make alterations later, without any additional loss of image quality.