Firstly what is RAW?
Well a RAW file is what your camera will output if it is expensive enough! It isn't a .raw file, it is unique to the camera i.e. Olympus .ORF, Canon .CR2, Nikon .NEF, Panasonic .RW2 etc
None of these files are compatible and either require to be read and converted by the Manufacturers software, Photoshop, DXO or other proprietary software.
A RAW file contains all the primitive data from your camera with the minimum of manipulation.
It will have the maximum colourspace data and the maximum bit depth that your camera can produce. It will require sharpening.
It is said it is the equivalent to a digital version of a film negative but in reality it is even more versatile than a negative as when you develop a negative that is it, with a RAW file it can be developed different ways over and over again.
There is a lot of snobbishness associated with RAW and I write as a user of a RAW workflow!
What are the minus points?
Well if you have a low cost camera it won't produce a RAW file but that doesn't mean you cannot take good pictures. Bracketing might be needed more often if the dynamic range of the image is high.
RAW files do require a longer work flow than using JPEG files.
The images cannot be shared until converted (Unless you have a Mac! :-)) or you can set up to save RAW & JPEG in camera.
They are big files, however due to the reducing cost and increasing speed of memory it is less of a nuisance than it used to be.
What are the plus points?
Well if you don't get things right in the camera then RAW gives you an opportunity to put things right.
If you heavily manipulate your image then a RAW image will hold together longer and show less artefacts. Although as shown in THIS
tutorial you have to go some to show the difference!
You have maximum flexibility and control.
All of the original data is in your file.
Use what suits you and don't be intimated by the "You must use RAW" brigade. If you expose correctly, set your camera to produce the best/biggest JPEG files you will seldom see a problem.
PS Although JPEG is a 'lossy' file format the one thing it doesn't lose is ART, nor does RAW stick anymore ART in!