What’s the difference between vector and bitmap images, which is better?

Vector and bitmap images are the two major graphic types. Both types are made of many individual objects, and both respond differently when enlarged and/or reduced. We use both types of files, however we prefer vector files as we can change size and colors easily without sacrificing quality. Vector images can be output at the highest quality in any scale. Common vector formats are EPS or AI.
A bitmap image (also called raster) is made of pixels (sometimes referred to as dots). The number of pixels in one square inch of an image is called the dpi (dots per inch) and is known as the resolution of the image (Example: 150 dpi means the image has 150 dots per square inch within that image). Quite simply, the larger number of dots you have in your image a higher quality of reproduction. Bitmap images loose quality when enlarged from their original size and must be created with that consideration. Bitmap images should be built at 600 dpi if built at the actual size. Common raster formats are PSD or JPEG.