SPOT the difference
We pitted a RAW file against a JPEG to see how they fared when processed identically
Here is how RAW performs against JPEG in an extreme lighting-and-colour situation – a shaft of clear sunlight falling on a mosquito coil burner on a luridly coloured tablecloth. The dynamic range from shadow to highlight is very high, and the magenta-red is in an area of colour that is on the margins of what the camera can accurately record. So there are three problems that are apparent from opening the image in Adobe Camera RAW (ACR): deep shadows that conceal the curl of smoke; clipped highlights; and distorted colour, especially at the edges of shadows.
Here, two things enable us to make a direct comparison between RAW and JPEG: one is that I always shoot RAW+JPEG, so both are available and identical in timing; the other is that by checking a box in Photoshop Preferences, we can open both in ACR. Applying the same adjustments to both, the difference is striking (the processing was first done on the RAW file, and then copied to the JPEG by means of the Synchronize button).
Shadow detail that has been preserved in the RAW file, and that enables us to see the smoke that has been lost in the JPEG. It just isn’t there any more. At the highlight end the RAW processor makes a decent fist of recovering the blown highlights, using the Highlights slider. On the JPEG, however, there’s nothing to work with because the extra data has been discarded. And finally, look at the magenta band that borders the shadow edges on the original, unchanged version; on the JPEG it stays, and is if anything more exaggerated; with the RAW file it blends back smoothly into the overall colour of the cloth.