Just wish to make a short remark that besides the functional difference of RAW and Jpeg, as others who replied have already suggested, there exists an obvious difference in quality and resolution between my *ist DS and *ist D's jpeg and RAW produced jpegs (both 24 bits in color depth). The difference can be viewed at full screen with care and can be found very easily at 100% even if you don't bother to pixel peep. Furthermore, the difference becomes more obvious with excellent Pentax optics which are mostly prime lenses.
IMHO, with any *ist D series camera, shooting RAW is the way to go. Don't use Jpeg mode unless it is a must.