Vector vs Raster
Also known as line art. Can be scaled to any size while maintaining quality. Vector artwork is preferred for all products (unless printing photographs). If your image file ends with .ai, .eps, or .pdf, it might be a vector image (though it could still be a raster image).
Also known as bitmap art. Composed of pixels (or tiny squares) grouped together to make a complete image. When scaled larger, the image will look pixelated (or jagged). If your file ends with .psd, .tif, .jpg, .bmp, .gif, or is a photograph, it is a raster image.