Nice diversion guys...but to get back to the OPs second question....
Think of your cameras sensor as a sheet of graph paper with 3008 points on the X axis and 2008 points on the Y axis.
Now overlay that graph grid onto the image you've just taken with your camera. When you shoot each of those grid squares is a sub part of the picture like a mosaic - thats a PIXEL.
The way the image is stored is determined by the sensor type - Pentax use the Bayer filter (you'll find lots of
references to that around) but their is an alternative called the
Foveon filter.
Regardless of the filter type, the
raw, unmodified data can be stored in the RAW format and is effectively unaltered in the full grid size. But there is a downside to this - you have to process the RAW pixels in some way to display it. A bit like developing a film. So you have to convert the raw pixels into an image. If you store in JPEG on your camera your processing the raw data
in the camera into a JPEG.
The processing of RAW files affects the quality of the final images (beyond the lens/camera effects), and some processing loses less information than other. The final storage form of the image after processing may be in a format that loses information or not. TIFF and Adobe PSD files for example have no loss, but many printing houses don't know what to do with them. You can also convert them to a JPEG.
JPEG takes that original image grid and mathematically alters it to reduce the amount of storage it occupies on your memory card (think of that as digital film). This compression algorithm still gives the same number of pixels as the RAW format,
but it introduces losses that
may introduce distortion between adjacent pixels.
Thats because to redisplay the image, the algorithm has to reconstruct the original image from what has been stored, and there is a loss of information in that reconstruction. Think of that as mixing or blurring of the original grid boxes so two or more boxes (pixels) will blend into one and distort the original. The amount of distortion is affected by the amount of compression. So a *** JPEG will have less distortion than a * JPEG on your camera.
Effectively your processing the raw data in the camera with a JPEG if you store in JPEG in the camera.
So to answer your followup question of how far can you blow it up (I think the megapixel debate is answered), shooting in RAW won't give you more pixels, but it will allow you to manipulate the image (develop it) on your computer with finer detail than a JPEG, and no loss of information.
However, you can't blow the image up infinitely and not see the pixels as they are of a finite size and will therefore appear as boxes (pixelation) the more you blow it up.
The two images below are from a TIFF at 400% zoom and 100% zoom (just to illustrate the pixelation) from about the same area of the image.
I hope that helps your understanding of the process.....