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There are two main types of computer graphics: vector images and raster
images. Understanding the difference between these two types of images is
useful when you're creating and editing digital images.
Vector images,
such as those created in Adobe Illustrator or CorelDRAW, are made up of
mathematically defined lines and curves called vectors. For example, in a
vector-based program, you draw a blue circle with a radius of 1-inch in a
specific location on the page. You can then move, resize, or change the
color of the circle; the program always references the mathematical
definition of the shape. Vector-based programs are best for type and bold
graphics, such as logos, which require crisp, clear lines at any size.

Raster images (Bitmaps), such as those created in Adobe Photoshop, CorelPaint, Paint, etc, consist of a grid, or raster, of small squares,
known as pixels. For example, a 1-inch blue ball in a raster image is made
up of the collection of pixels in that location, colorized to give the
appearance of a ball. When you edit the ball, the program references the
pixels in the grid. Raster-based images are best used for working with
continuous-tone images, such as photographs or images created in painting
programs. Because raster images are resolution dependent, they can appear
jagged and lose detail if they are scanned or created at a low resolution
(for example, 72 pixels per inch or ppi) and are then printed at a high
resolution.
Note: Because computer screens are made up of a grid of pixels, both
vector and pixel images are displayed as pixels. Vector-based products
render their shapes into pixels for display.
More information here
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