As Scuba Steve said, RAW is exactly that, the raw data from the sensor. When you shoot a JPEG, the camera uses your settings and its programming to determine what will be the best picture. It then throws away everything it doesn't need to make that picture and compresses the data into the JPEG format. RAW files are about 10 times as big. The downside is you'll only get about 84 pictures on a gig of RAW, compared to almost 600 large JPEGs. The upside is huge. You can take an underexposed or overexposed picture, or one that is all blue or green and recover at least most of the data you need to make the picture more resemble what you saw with your divelight. That's because with all that data, there is enough still there to find the red bits and properly exposed bits that you need. Once compressed into JPEG, an over or underexposed picture becomes really grainy and terrible or blown out when you try to fix it, and it's very difficult to fix the white balance if it wasn't close to begin with.
