Raster images are made up of pixels, Vector images are made up of paths. Raster images (sometimes called bitmap images) are made up of a grid of pixels, each of which can be a different colour.
Vector images, on the other hand, rely upon mathematical relationships between points in order to make up paths, which when all combined, make up a full image.
Bitmaps are better for photographs or images with complex shading. Vectors are better typefaces and illustrations. Vectors also scale much better than bitmaps.
Raster.
raster
Rasterisation is the progressive scanning of an image in a line by line fashion. TV and computer displays are scanned left to right line by line and so are raster displays. Vectorisation or vector graphics are the opposite of rasterisation. In this method of display the image is drawn in a point to point method. An oscilloscope is an example of a vector display. Raster graphics have the advantage of having the same refresh rate all the time irrespective of the complexity and colour depth of the image drawn (this is not the same as the framerate). All home computers now use a raster display output. Vector graphics can be coloured but are line drawings only. Examples of this type of colour vector display is the 1980's game Starwars or the monochrome Vectrex games consol from the same period.
Main difference is that you can enlarge vector graphics without lose of quality. Vector graphics can be scaled and changed at any time without any lose of quality or appearance while raster images can lose sharpness and quality when you scale or change them.
Raster graphics are stored as pixels, vector graphics are stored as geometric primitives. Images of the latter type can, in principle, be scaled infinitely, and pixelization will not occur.
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Photoshop is a raster/pixel-based program, and is also a product you have to purchase. Inkscape is a vector drawing program that's free.
Illustrator is a vector based program that can export raster images.
raster image = monitor, laser printer or ink-jet printer vector image = graphics plotter
Raster and Vector
Vector does not lose quality when resized, which is ideal for logos.
Vector and Raster or pixel images.