RAW is RAW - I.E. your in-camera settings really only apply to the JPG file or simply make post processing a bit easier by pre-setting your camera a bit closer to the current conditions, WB etc....
The user style settings are in an information file that is linked to the RAW data file.
If the camera is set to save JPEG files then the camera processor does the RAW to JPEG conversion using the information in the style setting file. If the camera is set to save RAW files on the memory card, then the image processing is accomplished using software on a computer. This software can also use the style settings information as the basis for how the RAW file is converted. Or, the RAW conversion software image setting interface can be used for developing an image for conversion to JPEG, TIFF or whatever file format one selects.
If the argument is about RAW vs JPEG format saved to the camera memory card, the answer has always been that RAW is camera sensor data with an attached setting information file, JPEG is an in-camera processed file using the JPEG parameter setting selected in the camera. If the camera has an option for RAW plus JPEG then both files are saved.
As mentioned, there are three ways to control the image captured by the camera, they are all related to how much light is captured by the sensor. ISO in digital cameras is analogous to a gain control knob. As the ISO setting is increased the "sensitivity" of the sensor is increased. As with any electrical circuit there is a signal to noise threshold, which increases along with the ISO setting. As cameras have evolved this has improved.
The benefit to us is that with current generation digital cameras we can use the ISO as a third control along with shutter speed and F stop. Thus, if one wants to use F8 while also maintaining a high enough shutter speed, the ISO can be increased with minimum concern that noise in the shadow areas will be a problem.
