When a photograph is taken the camera reads data from the sensor and adjusts white balance, contrast, saturation, sharpening, and applies noise reduction before saving the results in a JPEG file. Some cameras also support a Raw format that allows the user direct access to sensor data.
Reasons for choosing Raw are well stated in Karl Lang's article, Rendering the Print: the Art of Photography. Access to sensor data lets the photographer determine these settings during post-processing instead of relying on in-camera processing to make the best choice.
Images in this document were taken with a Canon G9 and processed in Adobe Photoshop. After several studio sessions and hours in Photoshop I've arrived at the following conclusions (for the G9, everything in this document is for the G9):
Big wins for Raw: White balance and high ISO.