I've mentioned before the advantages of RAW files and I firmly believe that anyone doing post production on their images should use them if only for the exposure latitude. There are exceptions of course (sports shooters, parents who take 1000 photos of their kids, etc) but
to get the full potential of the image quality in your images you need to be able to get to the original data off the sensor.
One of the cool advantages of RAW is that RAW converters keep getting better, and you can always go back and reprocess old shots. it's like upgrading your old 20D with a new image processing chip. It's also useful when you want to return to an old image for aesthetic reasons.
As an example I pulled out a picture I took of my friend and author Grant Stoddard back in January of 2006. Almost exactly 3 years to the day. Back when I knew even less about photography than I do now. It was shot on a Canon 20D with a 50mm prime and if I remember correctly, a big octabox on an Alien Bees 800.
Below are three different 'editions' of this image:
The first is a straight export of the raw image with default settings in Lightroom. It's a little over-exposed, but at the time I wasn't quite that observant.
The second image is what I came up with 3 years ago when I post-processed the RAW file. Really just exporting it with some extra contrast and then cleaning up a few do-dads. To my eye's now, his skin is really blown-out and has no detail. It's over saturated, and I was too heavy handed with the overall contrast.
This third image is what I did with it tonight. Obviously much more like my locally-contrasty sharpened look that people comment about. That said, it's very different than the one from 3 years ago. And just imagine what I'll do in 3 more years.