When digital cameras became commercially available, the memory cards used to store pictures were very expensive. Photographers could not afford multiple or high-capacity cards, so they wanted more images to fit on a single, smaller card. Smaller file sizes would also enable consumers who lacked an understanding of digital imaging to attach photos to email with minimum technical headaches.
With these two scenarios in place, manufacturers turned to an Internet-friendly format, JPEG. It was a proven technology, and one that was familiar to many users. A JPEG file looks for areas where pixel detail is repeated, such as the color white on every key of your computer keyboard. The file then discards repeated information and tells the computer to repeat certain color values or data to re-create the image. The drawback is that a JPEG file is lossy, so every time you modify it and re-save, additional compression is applied to the image.
Newer digital cameras, generally the pro models, offer newer formats, usually called raw. These raw (or native) formats have several benefits over shooting to JPEG. The images are usually captured at a higher bit depth, which means that the pixels contain more information about the color values in the image. Most raw files have a depth of 10, 12, or even 16-bits per channel instead of the 8 used by JPEG. This raw format also has a greater tonal range, resulting in better exposure for shadows and highlights. 
The image on the left is how the camera captured a JPEG. Making adjustments to the image is possible, but will lead to more degradation in image quality. The image on the right is a properly developed raw file. Working with raw files gives you access to greater control over an image.
The raw file captures the unprocessed data from the camera’s image sensor. While your camera may contain settings for sharpness, exposure, or lighting conditions, the raw file stores that info as modifiable information and captures the original (unmodified) data that came through your camera’s sensors. Each manufacturer treats the format differently, using a proprietary format. Fortunately, Photoshop and Aperture frequently update their raw technology to support the newest cameras on the market.
Because the raw data is unprocessed, you must essentially “develop” the image data within Photoshop or Aperture. You can choose to adjust several options related to the image, as well as the lens and lighting conditions. You can “tweak” the image after shooting it (as opposed to JPEG, which is limited to the settings you had when shooting).
For more tips like this, check out the book Video Made on a Mac.