Another way to look at a RAW photo [to as of why it is much better than JPEG] is this:
RAW format is just that... RAW. it is all the raw image data from the sensor. Nothing has been applied to the picture at all. At least not permanently.
You can alter EVERYTHING, or just about, in a RAW photo. And lose nothing in the process.
But you have to remember, since RAW has no compression at all, the files will be bigger, like Bruce mentioned.
So, if you plan on shooting in RAW format, you might want to invest in a higher capacity card. Say ATLEAST 4gigs, so you have plenty of room, for plenty of photos.