A camera raw file contains unprocessed, uncompressed grayscale picture data from a digital camera’s image sensor, along with information about how the image was captured (metadata). Photoshop® Camera Raw software interprets the camera raw file, using information about the camera and the image’s metadata to construct and process a color image.
Think of a camera raw file as your photo negative. You can reprocess the file at any time, achieving the results that you want by making adjustments for white balance, tonal range, contrast, color saturation, and sharpening. When you adjust a camera raw image, the original camera raw data is preserved. Adjustments are stored as metadata in an accompanying sidecar file, in a database, or in the file itself (in the case of DNG format).
When you shoot JPEG files with your camera, the camera automatically processes the JPEG file to enhance and compress the image. You generally have little control over how this processing occurs. Shooting camera raw images with your camera gives you greater control than shooting JPEG images, because camera raw does not lock you into processing done by your camera. You can still edit JPEG and TIFF images in Camera Raw, but you will be editing pixels that were already processed by the camera. Camera raw files always contain the original, unprocessed pixels from the camera.
To shoot camera raw images, you must set your camera to save files in its own camera raw file format.