Raster vs Vector
Raster or Bitmap images are resolution dependent images created by a rectangular grid of pixels. Every pixel is assigned an RGB color value and displayed on screen. These images cannot be scaled without a reduction in quality due to the nature of the image.
A vector graphic is composed of numerous points, lines, and shapes defined by mathematical equations. This process allows for resolution independent quality on the image. Each piece of the graphic is re-calculated when the image size is changed resulting in no quality loss.
The image below shows the difference between a vector and raster image at 7x magnification. The raster image becomes pixelated and grainy while the vector image retains all image data.