While the majority of people use their digital cameras to shoot JPEG files, serious photographers swear by RAW, which offers much increased possibilities in post processing. But while RAW images are of a higher quality than their JPEG counterparts, they also take up a lot more space and require more processing power to work with. That's why Adobe has included lossy compression in the recently announced 1.4 specification for its Digital Negative (DNG) RAW file format.
As digital cameras have seen improvements in things like their dynamic range and an increase in megapixels, the gulf between the quality of RAW and JPEG files has been getting bigger and bigger … unfortunately, so has the size difference. RAW files can often be seven or eight times the size of a JPEG, which can be a problem when it comes to processing images and, to a lesser extent, storing them.
Adobe is addressing this by including the option of a lossy compression format of its Digital Negative (DNG) RAW files. These new lossy DNGs, which are based on the same compression algorithm as JPEG, come in at about a third of the size of full RAW, but retain much of the flexibility to adjust things like White Balance while preserving detail. This means that they could come in handy if you realize you've underexposed a shot (just not by the six stops you might be able to recover in full RAW), or have a lot of batch processing to do.
Unless you have a Pentax, Leica or Hasselblad, the chances are that your camera doesn't allow you to shoot in DNG. However, because Digital Negative (DNG) is an open RAW format rather than the proprietary RAW your DSLR probably shoots, it is more future proof, and is slowly being added to more new cameras.
Because no-one knows what backwards compatibility there will be in software for proprietary RAW files in the future, many photographers also convert their RAW files to DNG for archiving. DNG files also open in most photo editing programs without the need for software updates every time a new camera is released.
Other updates to the 1.4 specification include the ability to apply an in-camera crop to an image (such as different aspect ratios) but then "un-crop" the image in post-production to see the entire sensor area, and combine data from multiple stitched files into a single DNG with "transparent" pixels allowing for undefined areas. New Floating Point (HDR) capabilities also mean DNG files can now retain a larger amount of dynamic range information from multiple RAW files.