Here we list what Raster and Vector images are:

1. Know that Raster graphics, also known as bitmap graphics, are digital images which can be displayed on a screen.

They are made from pixels which are points of colour.

Using raster graphics is ideal for drawing a photo image on a screen as each pixel has its own colour value. Raster graphics are resolution dependent – this means it cannot be scaled larger without losing quality. This loss of quality makes images look pixelated (the ragged square-like look you see when a raster image is enlarged too far). Adobe Photoshop creates and manipulates raster graphics.

2. Learn that Vector graphics are used to create shapes, lines, polygons, in fact any shape imaginable.

The software (Illustrator) thinks of it as a mathematical formula- for example, the user creates a line on a 45º angle from point A to point B for a distance of 50mm and is 2mm wide.The software draws the line based on this data rather than each pixel. Therefore vector graphics are infinitely scalable – if it’s 50mm in length or 5 metres in length the relationship between the points will always b e the same.
This is why vector graphics are always used with creating a logo. A designer can create the vector logo and that logo can then be applied to anything from a business card to building signage with no loss of quality. However, vector cannot be used to efficiently draw photo images.

Tips

Photoshop is the best at manipulating images, but also is very good at creating graphics for websites and banners. Its text tools are good for low-resolution elements like website headers, buttons, banners and offer aliasing tools that make type look good on screens and displays.
Illustrator is better for drawing complex shapes, illustration and for layout of single page documents. Also, its type tools offer more control.
Type and vector shapes will be much sharper than their raster equivalents when output at large sizes and file sizes are much smaller. Logos, fonts, posters, signage, illustrations, scale drawings are typically created in Illustrator.

source: http://www.zolamandesign.com/tutorial/daily-tips/30-the-difference-of-vector-and-raster-images