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Benefits and Disadvantages
Saving images in Camera RAW format has some big disadvantages; one is the preprocessing required to be performed on the image. Even if you accept the Photoshop CS2 Camera RAW Auto fix, you still have to process each image to convert it into a format that you can further edit or print (or even, in many cases, view).
Most image-display utilities, including those in Windows, can't handle Camera RAW images, so you won't see your image in Windows Explorer, for example, as you would a TIFF or JPEG image. While the Microsoft RAW Image Thumbnailer and Viewer PowerToy for Windows XP is compatible with Camera RAW formats from supported Nikon and Canon cameras, it's not compatible with all RAW formats from all cameras. If you have one of these cameras, however, you can download the PowerToy.
Because Camera RAW files are larger than JPEG files, you'll consume camera memory and cards at a higher rate than if you save images with JPEG compression. This means that you'll need bigger cards (or more of them), or you'll have to download more often. If you're used to shooting in burst mode, you may find that the size of the files the camera is required to save makes the mode slower, if not impossible to use.
A long-term issue with Camera RAW is that it's not a standard format between camera brands—and sometimes not even standard across a single manufacturer's product line. Long-term support for a wide range of disparate Camera RAW formats is unlikely. So, while it's sensible to save a duplicate copy of all your images in case of loss or damage to your computer, you should also be sure to save a set of images converted into a standard format in case, in 10 years time, you can't open the original RAW files because they're no longer supported.
There are some significant benefits in shooting Camera RAW, however; you can make adjustments to your images yourself and you don't have to rely on the camera's software to do it for you. Having made a change to one image, it's possible to save the settings used and apply those settings to other images taken at the same time in similar conditions, thus speeding up preprocessing time.
Because Camera RAW represents the unfixed image, there may be—probably will be—new tools released over the next few years to allow more fixes to the image. For example, the Curves adjustment and Auto fix settings were added to Camera RAW 3.0 in Photoshop CS2, and these features offer adjustment options not available in earlier versions. You can expect to see more adjustments included in future versions.
If you're using a Mac, there's a new Apple program, Aperture, to consider; it's designed for professional photographers shooting RAW. Aperture enables you to work directly with RAW files without converting them. It interfaces with Photoshop so you can click to send an image directly into Photoshop to do further enhancements.