Raster Graphics • Vector Graphics • Vectorization
Raster Graphics are images or bitmaps representing a generally rectangular grid of pixels or points of colors. Digital photos are an example of raster graphics. JPEG, TIFF, BMP & GIF are common raster graphic formats.
Vector Graphics are graphics made of geometrical primitives such as points, lines curves and shapes or polygons, which are all based upon mathematical equations, to represent images in computer graphics. Vector graphics can be scaled and edited without loss of quality and can be cut with a cutter for decals and signs. AI, EPS, CDR, FH are common vector graphic formats.
Vectorization refers to the process of using software and hardware technology to convert raster graphics into vector graphics.
Software
There are several software that can be used to prepare or edit vector graphics. The most known are Corel Draw, Adobe Illustrator and Inkscape (opensource). There are others, including the now discontinued Macromedia Freehand. Some cutting softwares can also be used to create or edit vector graphics, such is the case of Flexi-Sign.
Inkscape is an opensource software, which means you can legally get it for free online. Just do a Google search for Inkscape, download and start playing with it.