Hello again Rivets,
Bushfiva's post is an excellent explanation.
Perhaps in addition it might help if a very general understanding of what your camera does in producing a jpeg will help in deciding if you want to take your photos in RAW.
Your camera takes images in RAW to start with, it is the data file that the sensor generates. It is the onboard processor in the camera produces the jpeg. Some, (not all) of the parameters that it will apply are white balance, exposure, black and white point, contrast, saturation, sharpening and noise reduction.
In addition you can select picture styles for things like portrait, Landscape, neutral and faithful colours and B & W to list just some of them.
Another function that a jpeg conversion does is to reduce the file size of the image.
As a very basic explanation of how this works, (the only kind I understand
), say you have a photo where the top half is a clear blue sky of fairly uniform colour. The jpeg engine looks at it and says, there is no need for all the pixels in the file to produce that blue sky in the finished image, every third or fourth pixel can be discarded and still produce the same visual effect. This sort of thing goes on throughout the image resulting in a smaller file which has various benefits.
An example of the size reduction is a jpeg from my Canon 40D which often is around 3-4 MB while a RAW file is around 10MB. The size varies depending on how detailed the image is. The more detail, leaves, trees EG, the less opportunity for discarding data.
So back to RAW. Instead of the in camera processor deciding what sort of parameters to apply and how much data to throw out, (and it cannot be retrieved), with programs such as Adobe PSE/CS4, Light Room, Apple's Aperture, all these parameters are in your hands to adjust as you prefer.
In addition, with these programs one of the most valuable features is that the original RAW file is preserved. The adjustments that you apply in Light Room and Aperture etc., do not alter the original file. All the adjustments are attached to the original in a Sidecar file. When you view the image on screen it has those adjustments applied so what you see is what you have produced but they are not permanently applied. The original file is not changed.
It is your digital negative so to speak, you can always go back to the original state and start from scratch again.
Not so with the camera produced jpeg, It is what it is. Of course it can also be edited just that there is a lot less data to produce what you are looking for.
A small warning about processing jpegs. If you work on a jpeg and save the changes in jpeg file format, the jpeg compression does its thing and compresses the file again. Do this too many times and your file can become compressed to the point that it will start to show compression artifacts. A fancy term for pixellation or blockiness.
Having said all this there is absolutely nothing wrong with using the cameras jpeg settings. Todays cameras can produce excellent images and the range of picture styles work very well for those who do not want to put in the time and effort, (and the learning curve) to post process their photos from RAW.