Here I will give you some background into the differences between the three main programs used to manipulate images on your computer but first of all, a little info on using RAW as opposed to JPEG.
RAW vs. JPEG
.This is akin to Holden vs. Ford or Carlton vs. Collingwood with the exception that these cars and football teams are pretty equal things whereas the RAW and the JPEG files are not. You will find thousands of references to this if you search through Professor Google's pages, some are easy to understand and others are more involved. This is just a basic concept of the two to give you an idea of what the differences are. There are many opinions of which is better, what suits you is the decision that you need to make.
The Basic Concept
First of all, the basic concept is identical regardless of the setting, when we push the shutter button on the camera and take an image the camera collects image information onto the sensor in the camera, this is called RAW data. It is what happens next which is where the differences start but in a nutshell if you chose RAW, you will need to make adjustments to the images at a later date (post production) and if you chose JPEG, the camera makes the changes on your behalf there and then. This is partly why we can adjust the RAW file quite extensively whereas the JPEG has very limited adjustments available because the camera has already made them. The other reason is in the way that the Jpeg file is compressed but that's for another day.
After the shutter is pressed, the camera then looks at what setting you have chosen in the menu which is either RAW or JPEG (or both). If the camera is set to RAW, it will save the collected RAW data straight to the memory card in your camera and creates a very small jpeg image to display on the rear screen. If you have set JPEG the camera will apply certain amount of processing to the image such as colour enhancement and sharpening etc. before compressing the image and then saving it to the memory card as a JPEG. If you have RAW + JPEG set then the camera does both of the above and saves 2 x images, 1 x RAW and 1 x JPEG.
A point to note is that your computer will more than likely not be able to see a RAW file as an image unless you have installed the relevant driver, without the aid of a RAW viewing package such as Bridge or the software that came with your camera. However, the computer can see JPEG files without any additional software.
So Where Would You use One Format Over Another?
I always shoot my images in RAW regardless and I have to post process everything for e.g. for competitions or printing etc. I do this because I know that the camera is applying just a standard process to each image whereas I nearly always want to apply several different processes than the camera does. However, I only post process images that I want to use, if I just want to keep them then I just store the original. If I do use an image it gets saved as a TIFF format for processing because I can save it at any point with any layers intact. If required, I then create a JPEG copy of the finished TIFF. This means I now have three files of the same image, the original CR2 RAW file, a TIFF and a JPEG.
In my opinion if your taking an image that could possibly be used for competitions, publication or printing etc. then it should be taken in RAW. The exception to this could be images taken at a party or with friends or images taken on holiday which would be easier (not better) taken in JPEG.
In Post Production, Should I Work on my Original Image or Create a Copy?
There are two scenarios here, the first is that you save your RAW file to your computer and then open it in Photoshop to edit it. The second is that you save your JPEG image to your computer and again open it in Photoshop for editing. Please note that RAW files usually have file extensions such as .CR2 or .NEF or .ARW etc.
Scenario 1 - I have found my original RAW file on my computer using in Bridge and I have clicked to open it to do some post processing in Photoshop (I haven't made a copy). The image has opened automatically into Adobe Camera RAW (ACR) first and I have adjusted some sliders and applied some processes to it such as lens corrections etc. I have then clicked 'Open' and the image has appeared in Photoshop and I have applied quite a few changes to it and I am ready to save the image. In this scenario, if you simply click 'Save' and not 'Save As' Photoshop will still bring up the save dialogue box because Photoshop is not able to save the image back as a CR2 or NEF etc. so you have to specify another file format such as TIFF, DNG or JPEG etc. Therefore it is not possible to overwrite your original RAW file.
However, when you go back to Bridge you will see that the original image has indeed changed and it may have some grey icons in front of it. At this point you'll be thinking that I'm talking gibberish. However, the changes that you see are from ACR and those icons represent what I have done to the image. Rest assured that the changes haven't been made to the original image and are actually contained in a hidden file called a sidecar file, the original actually hasn't changed at all. If you go to Bridge and 'Right Click' on your changed but original image then from the menu select 'Develop Settings/Clear Settings', the original will go back to how it was before you started and is untouched.
Scenario 2 - I'm in Bridge and I can see my original JPEG file and I click to open it in Photoshop to edit it (I haven't made a copy). This time the image opens straight into Photoshop and I make lots of changes. I then click 'Save' and guess what, I've just overwritten my original. Unless you have made a copy first and worked on that or you have a backup of all of your images, then the original file is gone FOREVER.
Therefore, you should always have a backup, (YOU DO HAVE A BACKUP DON'T YOU) see Backing Up Your Images and you should always make a copy before editing if you are unsure at all.
Adobe Bridge (BR) is used as an interface between the images stored on your computer and Adobe programs such as Camera RAW and Adobe Photoshop. It is file management system that has some additional features but works in a similar way to the Windows Explorer that we see when we double click on our ‘My Computer’ icon but it is more biased towards working with images.
Adobe Camera RAW
You cannot open Camera RAW (ACR) without using Bridge first, there is no icon associated with ACR. It is a RAW converter that will allow you to see and adjust RAW files as well allowing you to batch manipulate many images. For e.g. if you have 100 RAW files that you want to convert to JPEG to upload to a website, instead of doing this one at a time, you can do this in one action on all 100 using ACR. You can make many normal adjustments to images in ACR so it can be used to make many common adjustments without the need to go into the more complicated Photoshop. You can also open Jpegs into ACR and manipulate them if necessary.
Adobe Photoshop (PS) is the main editing software for images. The main difference between ACR and PS for most photographers is the ability to use layers. However, PS can still be used to make the most basic of changes to an image including cloning and sharpening as well as very complex changes using layers and masks.