Unlike JPEGs, GIFs, and BMP images, vector graphics are not made up of a grid of pixels. Instead, vector graphics are comprised of paths, which are defined by a start and end point, along with other points, curves, and angles along the way. A path can be a line, a square, a triangle, or a curvy shape. These paths can be used to create simple drawings or complex diagrams. Paths are even used to define the characters of specific typefaces.
Because vector-based images are not made up of a specific number of dots, they can be scaled to a larger size and not lose any image quality. If you blow up a raster graphic, it will look blocky, or “pixelated.” When you blow up a vector graphic, the edges of each object within the graphic stay smooth and clean. This makes vector graphics ideal for logos, which can be small enough to appear on a business card, but can also be scaled to fill a billboard. Common types of vector graphics include Adobe Illustrator, Macromedia Freehand, and EPS files. Many Flash animations also use vector graphics, since they scale better and typically take up less space than bitmap images.
Definition from The Tech Terms Dictionary