Hello again... and welcome to Camera RAW 101.
In this tutorial, I will attempt to take you through the basic process of shooting RAW images and then through the basics of processing those images in Adobe Camera RAW (ACR) via Photoshop.
Let's start with a quick discussion of what RAW is, and what it isn't.
What is RAW?
Shooting RAW is often directly compared with a film negative, in that you have an image captured that must then be processed to get a print, or in our case, a useable, editable image. RAW is simply that - it is the raw data direct from the cameras CCD sensor along with the metadata that the camera recorded - i.e., the shutter speed, ISO, aperture, camera manufactuer, sensor size, date, etc. RAW files are essentially a greyscale capture with information that pertains to color and luminosity that, when converted, gets read as an image. It does not matter what you set the white balance or camera colorspace to - RAW is the raw data. A camera RAW capture by itself is a useless jumble of data - unreadable by the human eye - that must be processed by a converter. In our case, the weapon of choice is the Adobe Camera RAW plugin that is included with Photoshop & Adobe Bridge. It is also the workhorse behind Adobe's new processing powerhouse Adobe Lightroom. From this point forward in this tutorial, I will refer to Adobe Camera RAW as ACR and a RAW file as simply that: a RAW file.
Many cameras include their own software for processing RAW files: Nikon Capture is one example. I choose not to use these utilities in favor of using ACR. I think ACR does a better job, and the workflow leads directly into photoshop - which is where we are headed anyway.
Why shoot RAW?
In a word:
control. When you use RAW
you are the photographer and processing lab. You will control everything from the start to finish. You have control over the exposure, color, and how all that data is interpreted when you make an image. You may have heard the expression: "with great power comes great responsibility...". That is ultimately true when you use RAW - you get the responsibility for making good images.
With RAW captures, you have more control over your images than with any other method of capture. JPEG, TIF, etc - cannot come close to the amount of adjustments that you can do before the photo gets to photoshop. RAW is really everything that the camera can give you. Granted, as a photographer, your goal should be to make images that are properly exposed. Nothing beats getting it right in the camera. Let me repeat that: NOTHING beats a properly exposed image in the camera. The better job you do at taking photos means less work later. However, a RAW file has quite a bit of leverage when it comes adjustment time. In ACR you have up to an 8 stop range that you can move the exposure through. You can decrease or increase an exposure by plus or minus 4 stops. Typically, any correction plus or minus greater than 2 will start to suffer from noise and a host of other trouble, but I think you get the point.
RAW also allows us to be very specific in how we interpret color. Did you ever shoot a photo in Daylight white balance and then say to yourself - "that just doesnt look right - the color is wrong." Well, now we have the flexibility to fix all that. You also have a ton of control over the tonal range of the image and how much contrast you want. The list goes on - ACR is a VERY powerful tool that when used correctly delivers much more capability than any other method.
Heres a rather complex example:
You shoot a daylight shot of your car at sunset. The sky is beautiful - very dramatic with clouds and lots of color. However, depending on how you expose the shot, the sky may be too dark or too light. Or the sky can be right, but your subject is blown out or underexposed.
The problem with a typical digital image is in the range of the exposure. In many cases, the sky can get blown out while the foreground or subject is properly exposed. Conversely, when you expose for the sky, the subject becomes a sillouette.
With the amount of control we have over exposure in ACR, we can utilize a single image and processes it countless times in many different ways so that we have a properly exposed sky, a properly exposed foreground, etc. Then we can put those pieces together later in Photoshop to form one image where all the elements are correct.
something like this:
The other side of the coin - drawbacks to Camera RAW
1. Filesize. RAW files are larger as as such require larger CF cards in the camera, and more drive space after importing.
2. Speed of Capture. A typical camera will shoot more JPEGs per second or burst than it can shoot RAW - filesize and the amount of time it takes to write to card are the reason.
3. Speed of Processing. A JPEG or TIF is a done deal - you dont have to process those prior to editing. RAW files must be converted and processed.
A word to photographers about exposure and RAW:
If you have been shooting at the amateur or pro level for a couple of years, you may have heard the argument about intentionally underexposing images when shooting RAW. At one time, it seemed to be a good idea to underexpose because it is easier to recover the highlights from a dark image rather than losing highlights in a correct exposure.
DO NOT do this. Expose your RAW images as close to the right side of the histogram as you can. To the RIGHT is right. OK?
Why? Because our digital cameras are linear capture devices. That is: with a typical digital SLR, you have about 6 f-stops of dynamic range and the way that it works is by mapping tones to a scale.
Lets say that you underexpose by a stop and the camera records 4096 levels of tonal information. Half of these levels of information are always devoted to the next highest f-stop. So, on a 6-stop scale, the lowest f-stop (shadows) would contain 64 levels, the next one up 128, the next, 256, then 512, then 1024, and finally the highest level that contains the highlights would contain the remaining 2048. Got that - THATS HALF!! Half of your tonal information is in the highest f-stop recorded by the sensor. In non-technical terms, you should shoot for the highest exposure possible without blowing the highlights in order to capture as much information as possible. Ok? Nuff said. 
Getting down to business
Here's where we start the working part of the tutorial - complete with pretty pictures and nice screenshots.
I'm going to assume that you can figure out on your own how to set your camera to RAW mode (hint - its usually in the capture or quality menu) and that you can get the images off the camera into the computer.
Today I am going to use one of my shots from Nagano, Japan.
The Adobe Camera RAW screen:

Here are the basic components of the above dialog:
The Toolbar:

This box, in the upper left of the ACR window contains, from left to right:
zoom tool, the scroll tool, white balance eyedropper, color sampler, crop, straighten, rotate left, rotate right.
The file save area:

Here is where we will specify the manner in which our files are saved. NOTE: this is not where you select save as TIF, JPEG, etc. Those options are presented when you click on the Save button. The above boxes allow you to select a colorspace, image size, bitdepth, and finally, resolution. I recommend using Adobe 1998 if you are using color management and using 16 Bits to maintain image quality. Note that if you are unfamiliar with 8/16 bitdepths, it may take you a minute to get that figured out. You cant directly save to JPEG from 16 bit and there are several photoshop filters/modes reserved for working in 8 bit mode. Note: I wouldnt raise the resolution or size settings higher than the default output sizes for your camera. Throwing a head fake and trying to go big here will only hurt your output quality.
Finally here is the conversion panel:

We'll be concerned primarily with the Adjust tab. I dont believe you will need the Lens or Calibrate tabs anytime soon if you are just starting with RAW
A word about the Auto adjustments in ACR
I dont really like it when some program tries to tell me what it thinks is right. I like to make that call for myself. Sometimes, the auto adjustments work well, but most of the time, I find that I can do a better job. See which way you like, but I imagine that you will eventually want to have a default starting point to work with instead of the auto settings bumping things around.
To make your own default conversion settings, first set the adjust tabs to your liking. I recommend turning off all auto checkboxes, picking a common white balance temperature - like 5800 for daylight, zero the tint, set the exposure to 0.00, set shadows to 2 or 3, set brightness to 50, contrast to +25, and saturation to zero. Then use the flyout menu above the adjust tabs - where it says settings: - that little arrow to the right.

select Save New Camera RAW defaults to set these settings as your default. Then you will always start with the same settings and work from there. Its better to have consistency.
White Balance:
There are two parts to white balance. The color temperature and the tint. Temperature ranges from cool (blues) to warm (reds). Tint allows you to fine tune temperature - going one way makes the image more magenta, the other way goes green or cyan.
We are going to now set the image's white balance. You have three choices on how to do this.
1. pick a preset: daylight, shade, flash etc. can be choosen from the drop down menu.
2. grab the slider and guess.
3. use the white balance eyedropper. Choose a white or neutral gray area of the image and click on it to set the white balance. Clicking in different white areas may give you different readings, so experiment a bit to find one that works. Sometimes you may need to slightly warm or cool the temperature to make it look right, but this is the fastest and (usually) most accurate way to get the job done.
The following screenshot shows the white balance eyedropper and where I clicked to get my color:

Its magic! Look at the difference in color between the original screenshot and now.
Next up: helping the exposure along:
Setting the exposure can be a simple or complex adjustment - it all depends on the image. We are primarily concerned with how bright and how dark the image is.
Our options:
Exposure: basically this is an overall adjustment of all light and dark areas at once.
Shadows: where do you want to cut off the blacks? Push this slider to the right if you want the dark areas to be darker. This is a very sensitive adjustment and I rarely find that I need to use a setting higher than 5 to get the job done.
Brightness: This is very similar to the brightness dialog in Photoshop. Raising the slider pushes the brighness higher. Pretty much self explainatory. Again, I rarely use higher than 70.
Keep in mind that the above three; exposure, shadows, and brightness, work together. If you raise the brightness and then raise the exposure, the image is likely to be too bright. The opposite is true for shadows. You will need to find a good balance.
Here is how I adjusted the exposure for the project photo:
TIP! Want to see where the cutoff is for the highlights and shadows? (this is referred to as "clipping") While dragging the Exposure slider, you can hold down the Alt Key and ACR will show you which areas are being clipped. Hold down alt and swing the slider all the way right. The screen goes black. As you move left with the slider (while holding the alt key), areas of the photo start to come back in. The areas that become visible are where you are clipping the highlights. Do the same thing for shadows. The screen turns white when you hold alt and move the slider to the left. As you move back right, you can see where the clipping point is for the shadows. Guess what? Try this same thing in Levels! Those Adobe guys are pretty clever.
Contrast & Saturation:
Set your contrast higher to give the image further definition between the light and dark areas. Using too much contrast will cause the image to lose data due to clipping. Somewhere between 22-30 is usually sufficient. Some photogs recommend leaving contrast at zero and handling this in Photoshop.
Saturation is optional. Personally, I leave this at zero and apply saturation to the final image in Photoshop.
Save, Open, Cancel, Done
Once you have your image looking like you want it, you can save it, open it, cancel or just close ACR. The Save dialog allows you to pick a save location in the destination section - choose a new folder, browse to a location, or save it in the same place you opened it. The File Naming section is a useful tool for assigning names to the file and there are many ways that you can use the file's metadata to help automate this part. Finally, you will choose a format for the document to save to. I recommend using TIF's, but you can also use Digital Negative, JPEG, and Photoshop PSD. Click on Save from the save dialog to... errr... uhhhh... save.
Open will directly open the RAW conversion in Photoshop. You can then save from there whenever you are ready.
Done simply closes the ACR window. Dont worry about losing your adjustments, they are saved in the .xmp data file that goes with the RAW file. The next time you open the same RAW file it will use the previous conversion settings.
Cancel simply closes ACR and does not save anything.
Is that it?
Hardly. ACR has much much more to offer than I have mentioned here and there are literally books on the subject of Camera RAW and how to do conversions. One thing that I hope does not confuse you: even after doing the conversion in Camera RAW, you will still need to go to photoshop and run levels/curves and do some sharpening. Camera RAW gets you a good base to work on, but Photoshop adds the final touches that really makes an image a keeper.
One last thing - as you can imagine, doing one image at a time is a real drag - it takes a lot of time. If you have many images that you shot under similar lighting conditions around the same time, you CAN select many images at once and then open them all at once in ACR. This brings up a new window on the left with all of your images that you selected. You can apply adjustments to one image and then select all and sync them with your selected image. You can then use the save dialog to assign serial numbers or some other form of id and save the group. In this manner, you can run through groups of photos and do the conversions much more quickly than doing each image individually.
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Following my ACR conversion of the Nagano Zenkouji Temple image that I showed above, I ran it through Levels, Curves, and Saturation in Photoshop. I then applied sharpening and gave it a thin border to get the final image below.
I hope that this tutorial was informative for everyone. It took a while for me to get to writing it, as I like to be commited to providing a good lesson for all. Hopefully, you will be able to take some of the concepts here a lot further as you get used to the dialogs and where everything is.
As always, I look forward to comments and questions.
-til next time, happy shooting.-
Matthew.