Raster graphics store images as a grid of pixels that can lose detail when enlarged. Vector graphics use mathematical equations to define shapes, keeping images smooth at any size. Lossy compression discards some image data, resulting in loss of pixels and detail, while lossless compression reduces file size by about 50% without data loss. File formats like BMP, PNG, GIF, TIFF, JPG, and PSD are used for different types of images and uses.