What are raster graphics and what are vector graphics? What's the difference?
Raster Graphics Raster graphics are "pixel based" images. They are made up of grids of dots, or pixels, with each pixel containing color information.
If you zoom in on a raster image you can see the pixels that it is made up of.
A grid is used to map where pixels are placed. By placing different coloured pixels throughout the grid, an image is produced. An image with a larger, denser grid (more squares to place pixels into), can hold more detail than an image with a smaller, less dense grid, and is referred to as a "higher resolution" image. A "lower resolution" image contains less pixel information than a "high-res" image.
Raster images are the only choice for photo realistic images, as vector graphics are limited to outlines and fills of shapes.
Raster images are also known as bitmaps.
Vector Graphics Vector graphics are not made with pixels, they are made with vectors. Vectors are defined directions used to draw graphics on screen using mathematical equations, as compared to raster images that use a grid of mapped pixels.
Instead of placing pixels into a grid to create a circle, vector based programs draw a circle from an equation. The advantage of using equations instead of pixels to draw shapes is that there is no "resolution" involved. Because the vector based drawing program creates a circle based on an equation, a circle drawn with a 10 inch radius is no different than a circle drawn with 10,000 inch radius (one just has bigger number in the equation than the other).
Vector graphics can be resized to any size (bigger or smaller) without becoming "pixelated" or without losing resolution, unlike raster images than can only be re-sized down without losing clarity.
Vector graphics are the best choice for line art (Example: logos, and text) because the outlines of these shapes are always sharp, and cleanly defined.
Fonts are vector based. For each character of a font there is an equation defining it's shape. In general, text should be made using fonts, and not raster images. I do not recommend laying out the text of your design in Adobe: Photoshop. Photoshop does handle nice clean vector based fonts, however any fonts used in your file will have to be "rasterized" (or "rendered") and converted from vector form to raster form. I would recommend Adobe: Illustrator for creating vector text. Raster text is not as sharp as vector text.