Raster is when each individual pixel is defined... such as in a photograph. Files with extensions like .jpg or .tif are commonly raster. Adobe Photoshop is a common program used to create and manipulate raster images.
Vector is when lines, points, curves, etc are defined mathematically to create an image that is infinitely scalable. Files with extensions like .ai or .eps are commonly vector. Adobe Illustrator is a common program to create and manipulate vector images.
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