Most of today’s cameras capture at least 12 bits per channel per pixel, for a possible 4,096 levels in each channel. More bits translates directly into editing headroom, but the JPEG format is limited to 8 bits per channel per pixel: So when you shoot JPEG, you trust the camera’s built-in conversions to throw away one-third of your data in a way that does justice to the image.
When you shoot raw, though, you have, by definition, captured everything the camera can deliver, so you have much greater freedom in shaping the overall tone and contrast for the image. You also produce a file that can withstand a great deal more editing in Photoshop than can an 8-bit per channel JPEG.
Edits in Photoshop are “destructive”—when you use a tool such as Levels, Curves, Hue/Saturation, or Color Balance, you change the actual pixel values, creating the potential for either or both of two problems:
Figure 1 shows how the compression and expansion of tonal ranges can affect pixel values. Don’t be overly afraid of losing levels—it’s a normal and necessary part of image editing, and its effect can be greatly reduced by bringing correctly exposed images into Photoshop as 16-bit/channel files rather than 8-bit/channel ones—but simply be aware of the destructive potential of Photoshop edits.