When you are Graphic Designer this is a basic thing that you have to know. What's the difference between Raster and Vector graphics and what each one is used for.
Raster Graphics:
Most images you see on your computer screen are raster graphics. Pictures found on the Web and photos you import from your digital camera are raster graphics. They are made up of grid of pixels, commonly referred to as a bitmap. The larger the image, the more disk space the image file will take up. For example, a 640 x 480 image requires information to be stored for 307,200 pixels, while a 3072 x 2048 image (from a 6.3 Megapixel digital camera) needs to store information for a whopping 6,291,456 pixels.
Since raster graphics need to store so much information, large bitmaps require large file sizes. Fortunately, there are several image compression algorithms that have been developed to help reduce these file sizes. JPEG and GIF are the most common compressed image formats on the Web, but several other types of image compression are available.
Raster graphics can typically be scaled down with no loss of quality, but enlarging a bitmap image causes it to look blocky and "pixelated." For this reason, vector graphics are often used for certain images, such as company logos, which need to be scaled to different sizes.
Vector Graphics:
Vector graphics are comprised of paths, which are defined by a start and end point, along with other points, curves, and angles along the way. A path can be a line, a square, a triangle, or a curvy shape. These paths can be used to create simple drawings or complex diagrams. Paths are even used to define the characters of specific typefaces.
Because vector-based images are not made up of a specific number of dots, they can be scaled to a larger size and not lose any image quality. If you blow up a raster graphic, it will look blocky, or "pixelated." When you blow up a vector graphic, the edges of each object within the graphic stay smooth and clean. This makes vector graphics ideal for logos, which can be small enough to appear on a business card, but can also be scaled to fill a billboard. Common types of vector graphics include Adobe Illustrator, Macromedia Freehand, and EPS files. Many Flash animations also use vector graphics, since they scale better and typically take up less space than bitmap images.
Definition Source: http://www.techterms.com


