My understanding of it mate is that 'Vectors' are the mathematically calculated lines used to draw certain shapes that, when combined, create the art in some illustrations. 'Raster' drawings, as far as I'm aware, are the ones where you work on the individual bitmap pixels (a lot of the stuff done with tweaks in Photoshop, for example).
Vectors keep their shape and integrity no matter what scale you zoom to, so with a technology like SVG (Scalable Vector Graphics), the image looks identical in quality terms no matter how much you zoom in or out. With Raster graphics, however, you'll get quality degradations according to how far you zoom in (I think anyway).
The term I'm toiling with is 'vectoring', but I think maybe that's to do with overlaying transparent layers to create depth effects. When you do that, it can cause the vector image to distort when you resize it etc... but I'm not sure.
McPhisto dude, is that about right?