As strong as my convictions are I am still amazed when people ask about the benefits of one or the other. I thought this would be a nice subject for a post, so here goes.
To begin, the technical aspect of camera RAW files is much too broad to cover here. If you are interested in learning more there is so much available on line to read. I will just touch upon some of the more notable benefits RAW files have over JPEG.
- COLOR BIT DEPTH: JPEG files are 'compressed' files, meaning that a lot of information that gets recorded by the sensor is stripped away when the file is created. RAW files retain that information and makes it available for post processing. JPEG images use 8 bit technology allowing the recording of 256 separate colors per channel or 167,77,216 individual colors. RAW files record at a higher bit rate*, depending on your camera, effectively giving you billions of colors rather than millions. This translates to smoother tonal changes. So, for example, instead of a color being divided into a gradient of 256 colors you get one divided into 4,096 colors.
* Keep in mind that your camera's preview screen will not be able to display a 12 bit image effectively. The same goes for your computer screen. Most screens are 8 bit display systems.
- TONAL FLEXIBILITY: The added bit depth allows the shifting of tonal values in post processing to be smoother. Not so much with the small adjustments but with the more dramatic shifts. As you may know, practically all images benefit from a boost in black levels. That shift will be smoother when working with a greater number of tonal divisions that the 12 bit image gives. The same principal applies to luminance adjustments, sharpness and color adjustments, etc.
- EXTENSION OF DYNAMIC RANGE: Because of the greater bit depth, a RAW file records more lighting information in a scene than a JPEG. With the proper application of enhancements to the shadow and highlight areas in post processing an image's dynamic range can be extended by several stops. This native information can be manipulated without the need of specialized software or without the tone mapping of separate images like HDR software does.
- INDEPENDENT COLOR BALANCE: Because a JPEG is a 'compressed' file it means that the camera is doing a certain amount of post processing during image recording. Light quality has a direct influence on the digital sensor and your camera's white balance settings are used to correct for variables in color temperature. This correction is applied to a JPEG but dismissed in a RAW image file*. Actually it is kept in the file's metadata information (along with other camera information such as camera type, lens type, flash info, picture styles, etc.) This allows the fine tuning of color temperature in a RAW file that you can't do with a compressed file.
* Your camera uses your white balance setting when it displays the preview image in your camera's preview screen. The preview image generated from a RAW file is a small JPEG.
- LOSS-LESS EDITING: Since a RAW file is strictly unprocessed information straight from the camera's digital sensor, editing software takes this information and manipulates it without touching the original image file. Any changes made gets recorded in a separate data file and is used as a 'recipe' for the final rendition. A JPEG image is pre-processed by the camera and the original sensor data is discarded. Any changes made to a JPEG requires making additional changes to an already processed image.