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There are a number of questions that come up frequently on photography forums and I find myself copying and pasting some answers with regularity, so I'll add them here for ease of reference.
When you take a photograph and it is recorded as a JPEG - it is 'developed' in the camera according to the settings you choose and specify - these are the Processing Parameter settings outlined on pages 55 and 56 of the manual - these are set in the menu - you choose the level of sharpening, saturation, contrast etc. you want applying to your images. The JPEGs come out of the camera prepared according to those Processing Parameters, size and compression level and other shot settings you chose. You can of course still manipulate the image in software later, but your starting point is fixed.
If you were to take the same shot in RAW (which also has a medium sized embedded JPEG you can also use) - those shot, compression settings and Processing Parameters are only hard recorded in the embeded JPEG - the RAW copy is purely raw data off the sensor and whilst it takes note of the settings, they're not set permanently. If you open that image file in your RAW converter, they usually open initially with the 'as shot' settings (and you can save/export them 'as shot' without any intervention if you chose) - these are the parameters and exposure settings you took the photo with.
The big advantage in working in RAW is that you can now adjust the suggested settings considerably, before exporting that image into either a JPEG of TIFF image file. So if you took a shot that was underexposed, both a RAW and JPEG version would look exactly the same in the LCD and if you exported both without any tinkering, the images would look the same.
But - and here's the biggie - the RAW file has much more flexibility for adjustment and change than the JPEG equivalent. If you get the shot right in the first instance, chances are that it won't make any discernable long term difference - but if you get it wrong in some way - the RAW offers you the power and flexibility to make corrections and adjustment with much greater control and less loss of potential quality. With RAW you can make exposure adjustments up to a couple of stops in either direction and it's even possible to recover modestly blown highlights - this just isn't possible with JPEG shots, where once the data has been lost, it's gone forever. It can certainly recover over exposed shots well.
I work in RAW and am a big fan of it, but only you can decide if the workflow will suit you and the type of shots you take. For me, I enjoy the workflow and the flexibility provided by with RAW and with live music work especially, it increases my number of keepers by a significant proportion, where colour lighting in particular can cause major over exposure in some colour channels. These I can now recover very effectively from a RAW original, even working with a black and white RAW workflow in the most extreme cases.
The exposure you set for taking a photograph is a triangle between shutter speed (how long the iris of the lens is open, letting light in), the aperture (how wide the iris opens when it does) and ISO (the sensitivity of the sensor to the light hitting it).
You can manipulate the three relative settings to get the end result you want from the image - there are a multitude of setting combinations that would all give a correct exposure for any given scene and you need to make choices to get the result you want for the scene, in terms of depth of field, capturing or freezing movement etc.
By way of an example, purely for the sake of argument, if you want to take a landscape scene the meter might indicate that at the ISO of 100, you'd need 1/200 second shutter speed at an aperture of f5.6. But for a landscape, an aperture of f5.6 will provide too shallow a depth of field (the depth of field is the amount of the scene from front to back, that is of an acceptable degree of sharpness, known as DOF) if a tree in the foreground is in focus, a hillside behind might not be - so ideally you'd close down the aperture (bigger number, but a smaller hole in the iris, resulting in a greater depth of field) to increase the depth of field in your recorded scene. So you dial in f16 to increase the depth of that acceptable sharpness in the scene - but now that indicates that you'll need a shutter speed of 1/25 second - too slow for you to reliably hand hold the shot and to avoid plants blowing and showing movement blur - so you need to secure a faster shutter speed somehow.
This is where the ISO comes into play, the third point in your triangle of settings - if you increase the ISO - the sensitivity of the image sensor - you can get away with the shutter being open for a shorter period of time as the sensor doesn't need as much light to reach it now. So for your hypothetical landscape scene, up the ISO to 400 and you can now get away with a shutter speed of 1/100 second, fast enough to allow you to hand hold comfortably and prevent movement blur in your subjects.
The ideal is to keep the ISO as low as possible, as quality deteriorates with higher ISOs in various ways - but - it's easier to spoil a shot with too slow a shutter than with the potential trade off of going to a higher ISO - I'd always go higher with the ISO before losing a shutter speed I needed or an aperture I wanted. Any noise introduced at higher ISO or decrease in the picture quality is much easier to fix and overcome than movement blur or soft focus. So keep to the lowest ISO that's practical, but not at the expense of the other two points in your triangle.
In short: you use it to take a photo of the colour cast of the lighting in your scene, then use this image in the camera to set a custom WB that compensates for it. The Pringles lid (or coffee filter paper, tracing paper, drafting film etc.) diffuses the light of the scene and only records the colour cast of the lighting without any scene details. So it's personal to that particular scene and you'd need to set another one if the lighting changed or you move.
If you hold the lid in front of the lens and point it at the scene (you'll need to put it in manual focus, or you can't take the shot) - there's some debate about whether you should point it at the subject you're taking or the light source - I personally try to point it at something neutral and mid-tone within the scene, you will see that you just see an area of light - take this image and save it - you may need to work in Av or something to set an exposure and it may be quite a long one - but what you're after is the colour cast of the lighing in the scene. I tend to start off with the preset WB that I consider most likely for the scene when I take the shot.
Go to the camera menu and the first screen, next to bottom item for custom WB. It will ask you to select and image and will present you with the last one you took - your Pringles lid shot - it will just look like a blank screen - if at this stage, that screenful looks like a fairly neutral grey, I often don't bother progressing, but it may well have a distinct colour cast. If you want to use this scene for your custom WB - hit the (SET) button. You can then delete this image if you want, but if you're working in RAW, it can provide a useful bench mark for setting WB as you develop images.
Now you need to tell the camera to use your custom WB - go back to shooting mode and hit the (WB) button and choose the very bottom right option for a custom WB. That's your custom WB set for that scene. If you change environment or your lighting changes, you need to repeat the process. As you take the first shot, check a preview and ensure the results you're getting meet your needs.
If you're struggling to manage depth of field in your images and don't know how to judge it, or often download images that have been spoiled by insufficient depth within the frame being of an acceptable level of sharpness, the depth-of-field preview button will become your new friend - although it only works in the creative modes. Many people don't use it as a cursory test just shows the image in the viewfinder going dark and it's function isn't immediately obvious, but there's more to it than that and it's a very useful tool to master. The button is located on the lower left area of the lens mount on the camera body, just under the lens release button and can be operated by your left thumb.
When you take a photo, the iris in the lens - which is the hole in the centre of the lens the image goes through - opens to a pre-determined size as you take a photo - this is your aperture - a small number like f2.8 is a big hole and as a lot of light can get in through this wide hole, the shutter doesn't need to open for as long. If you stop down the lens by closing the aperture - to a higher numbered aperture - say f16, the hole is much smaller, letting in much less light, therefore it needs to stay open for rather longer to let the same amount of light through.
When you're working with your camera, framing, focusing etc., the lens remains open wide, to give you the best light to work with and the brightest possible image, so the camera's resting aperture is the maximum the lens can open to - regardless of what aperture you've set for the exposure.
So you might be about to take a photo at f11, but if the widest aperture the lens is capable of is f3.5, this is the size of the hole you're actually looking through the viewfinder (VF) - so what you actually see with your image in the VF is the DOF for f3.5.
To demonstrate this function, set a tighter aperture in your camera (in Av mode or manual and say f11) and look through the VF and focus on a close object in the scene, but also keep your eye on a distant object within the frame - it will be out of focus. Now press the DOF preview button, this temporarily closes the iris of the lens, to the aperture you've actually selected for the shot - in our test that's f11.
The view in the VF will now go dark as the hole you're looking through is much smaller - but this also previews what the DOF will be like for that aperture, so although it's darker, if you still keep your eye on the distant object in the frame, you'll see it come sharper as long as the aperture you've selected is tighter than the maximum of the lens. When you work with a lens wide open for the exposure anyway, nothing will happen as you're already seeing the DOF preview for the widest aperture and the iris doesn't change when the DOF preview button is pressed.
To see it in action, set an aperture of say f11 and turn your camera to look into the front of the lens and touch the DOF preview button and you'll see the blades of the iris close up to show a hole about half the diameter it was before touching the DOF preview button.
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