The following is an excerpt from 'Bitmap and Vector Graphics Explained' by Chance Agrella on http://www.photoshopsupport.com/shoptalk/vectors-and-bitmaps.html. I found this article very accurate and easy to read and wanted to share it with you.
'Bitmap and Vector Graphics Explained' by Chance Agrella
A bitmap graphic (you may occasionally hear "raster" graphic) is basically a large grid - think of a huge checkerboard, or a screen door, or any grid with a lot of little squares. If you put a different color in each little square, you can build an image square by square. When you stand far enough away from the grid, the individual grid squares blend together and you see a complete photographic image.

This is how computer monitors and televisions work - they both are a series of little squares (pixels) in a big grid (the screen). When you specify your monitor's resolution (800x600, 1024x768 etc), you are telling the computer how many dots across by how many dots tall, and thus you define the grid that gets filled in with dots to show the image.

This is also how the pixel or megapixel count of a digital camera is derived: If you have a 6.3 megapixel camera, that means the files produced by the sensor (digital film) will be something like 3072x2048. Just do the math - 3072 X(times) 2048 = 6,291,456. A megapixel is a million pixels, so we get 6.29 megapixels, which is close enough to 6.3 for the marketing people.

Hopefully this is not huge news so far, but the important thing to get out of this is that the grid is finite, as in "of limited size." You can make a grid any size you want, but it will still be a defined size. The quality and appearance of a bitmap image is determined by (1) its size and (2) its resolution. In some instances, as when printing images to actual paper, "size" can refer to the number of pixels (like 800 x 600) or the physical dimensions (like 8 by 10 inches).

Resolution refers to a couple of different things in different contexts. Sometimes it references the density of pixels, and is usually expressed as Dots Per Inch (DPI).

Graphics have different resolutions for different purposes, and it's important to know how you will be using the graphic. If you don't have high enough resolution and you try to print an image, it will look blocky or fuzzy. If your image is very high resolution but you use it on the web, it will take longer than necessary to download. So what resolution, or DPI, should you choose?

The traditional rule of thumb is 72 DPI for images that will only appear online and 300 dpi for images that can be commercially printed. If you are printing images at home, 200 DPI or so should give you acceptable results. Resolutions higher than 300 DPI generally will NOT give better printed results - you just get unnecessarily large file sizes. The term DPI also is seen in specifications for printer and scanners - how many dots per inch the device is capable of scanning or printing.

The term resolution is also used when referring to the overall size of a bitmap graphic, as in:

Question:"What's the resolution of that photo?"
Answer (1): "It's 2400 by 1600."
The answer could also be (2): "It's 300 dpi."
The best answer would be (3): "It's 2400 by 1600 at 300 dpi."

So, for best results you may need to know the number of pixels, the resolution, the physical size, and how the image is to be used. Especially when the images are to be printed by a commercial printer, you have to know dimensions and the DPI to ensure a quality result.

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Part 2: What is a vector graphic?
In regards to this discussion, a vector graphic is one in which the shape or path of a line is defined by a bit of math. Vector graphics are basically points connected by lines of various shapes, filled with solid or gradient colors. So it's point A, connected to point B by a line of some shape, with the shape of that line defined by a little mathematical description. More points and more lines can make more complex shapes. The line that defines the vector shape is referred to as the path.

Two versions of the same two points (A & B). Only the math that describes how to get from A to B (the path) is different. Five points and the path between them can make a simple shape. Use enough points and you make things like the Freerange Stock logo.

Drawing a shape with math? What's that supposed to mean? Well, if we think back to our algebra classes, lines and curves can be drawn in an X and Y coordinate space by graphing equations. (See Illustration 6.) In Illustration 6, a graceful curved line (parabola) is drawn simply by graphing the equation y = (x squared). By making the math more complicated, you can define more nuanced shapes. And there is no grid to worry about: as you make y = (x squared) much larger or much smaller, the line of the parabola is still perfectly defined. Its resolution is infinite.

The blue line is a graph of the little equation y=(x squared)
Basic geometric shapes like lines, circles, ovals, squares, rectangles and polygons with any number of sides, are mathematically simple and are a good starting point for vector graphics.
Images made up of shapes, like line drawings and illustrations and logos, are often well suited for vector formats. Images with dense, differing colors, like photographic images, are NOT well suited to vector graphic formats.

Some advantages of vector graphics:
There are (at least) three very neat things about vector graphics:

- First, the file sizes are usually very small - rather than describing the many, many squares in a bitmap, it is only necessary to describe the math involved in recreating the image. For example, the Freerange Stock logo file used as the basis for the third panel of Illustration 5 above is only 36KB.

- Second, they have infinite resolution - no matter how large you expand or how small you contract the image, the math creating it holds up and it will always show smooth, clear edges and details. The little 36KB logo file mentioned above can be printed at ANY size (see Illustration 7) and will look great.

Here's the Freerange vector logo, viewed at 100% on screen. Here's a wingtip from the same logo, blown up to 1600% on screen. Still sharp.
- Third, the image remains editable as long as it remains in a vector format - any program that can understand the math will open the graphic can and modify its shapes, arrangements and colors. The points along the path can be moved around, and, when selected, have little arms sticking out of them - drag the arm and it changes the shape of the path as it passes through that point.
Once a "universal" version (usually an .eps file) of a graphic or a logo is PROPERLY originated, it can be used by may people and many different software packages. You do not have to recreate images in each application - this saves time and allows you to distribute and have greater control over your logo/brand/whatever. This can also be a big mess (see disadvantages below...).

Some disadvantages of vector graphics:
- The primary thing to keep in mind with vectors is this: Vector formats are NOT well suited to photographic images. The many colors and complexity necessitated by representing photographic subjects quickly overwhelms the formats. This isn't necessarily a disadvantage - it's just not something for which vector formats are well suited. Similarly, for advanced manipulation and complex colorings and lighting effects, you would need to rasterize (defined in Part 3) the vector into a bitmap and go from there.

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