'PSD' File Format
The 'PSD' is the native file format for Photoshop. There is a companion 'PSB' format for seriously large images, but it is very unlikely that you will ever need to use this.
Figure 1 The 'PSD' format will save any extra functions you may have in the image
The 'PSD' file can hold all the extra functions that you may end up using when correcting an image, such as very large working file size, 16 bit depth, extra wide colour space, masking channels, and adjustment layers.
NOTE: These extra functions will be covered in an advanced section of the digital image training.
However, the 'TIFF' file format can hold the same extra functions, that you are ever likely to use, that the 'PSD' can, so you may wonder why we should bother with this format. However, your 'TIFF' files will have two stages: the working stage where you may have the extra functions mentioned above, and the finished stage where the 'TIFF' files are ready to deliver to the client. If you keep these 'TIFF' versions apart with clearly labeled folders, then you should have no problem. But you do have an option to keep the "work in progress" images from the "ready to deliver" images, by using two file formats to visually separate the two sets of images.
NOTE: It is safe to use both 'PSD' and 'TIFF' formats as saving from 'PSD' to 'TIFF' will not damage the image if the correct 'TIFF' settings are used. See the page on the 'TIFF' File Format to read what settings should, and what should NOT, be used.
Think of the 'PSD' file as being private, where the images are still being worked on. And the 'TIFF' file as being public, where all the extra functions have been removed and they are ready to be sent to the client. If you have all your images stored as 'TIFF' files then you will need to check that they are the correct ones before delivering them.
NOTE: It is very unlikely that any client will ever ask for you to supply 'PSD' files.
Figure 2 The 'PSD' options panel
There is only one option with the 'PSD' file file format, and that is whether you want to maximise the file compatibility with older versions of Photoshop. It is usually wise to select this option, although it will mean an increase in the saved file size on disk.
If you don't want to be bothered with this question every time you save a 'PSD' file, then you can open the Photoshop preferences and set the option to be "Always" or "Never", as you prefer. Then, other than asking for the file name, and where to save the file, you will have no 'PSD' options to answer at all.
Using the 'PSD' file format is not something you have to do, just something you may find useful.
As a general rule, do NOT send 'PSD' files to the client, but there can be exceptions.
NOTE: If you are a designer then there are some advantages in using 'PSD' files, rather than 'TIFF' files, when working with InDesign. However, this is beyond the scope of Shutha.