Digital image processing involves performing operations on digital images using computer algorithms. It has several functional categories including image restoration to remove noise and distortions, enhancement to modify the visual impact, and information extraction to analyze images. The main steps are acquisition, enhancement, restoration, color processing, compression, segmentation, and filtering using techniques like pixelization, principal components analysis, and neural networks. It has applications in medical imaging, film, transmission, sensing, and robotics. The advantages are noise removal, flexibility in format and manipulation, and easy storage and retrieval. The disadvantages can include high initial costs and potential data loss if storage devices fail.