About vector and bitmapped graphics

Vector graphics (sometimes called vector shapes or vector objects) are made up of lines and curves defined by mathematical objects called vectors, which describe an image according to its geometric characteristics.

Vector illustration

Bitmap images—technically called raster images—use a rectangular grid of picture elements (pixels) to represent images. Each pixel is assigned a specific location and color value. When working with bitmap images, you edit pixels rather than objects or shapes. Bitmap images are the most common electronic medium for continuous-tone images, such as photographs or digital paintings, because they can more efficiently represent subtle gradations of shades and color.
Bitmap images are resolution-dependent—that is, they contain a fixed number of pixels. As a result, they can lose detail and appear jagged if they are scaled to high magnifications on‑screen or if they are printed at a lower resolution than they were created for.

Bitmapped image (photo)

Read more at Adobe Help Resource Center, http://livedocs.adobe.com/en_US/Illustrator/13.0/help.html?content=WSA9EFBCB8-EC3C-4a5b-AFCD-2A3F77D917D5.html and http://livedocs.adobe.com/en_US/Illustrator/13.0/help.html?content=WSCFDA855F-B5B4-4316-AA0A-DFA4CC1DAC7D.html