JPEG is a lossy compression method, which removes information from the image to make image files smaller.
As MusicaleCA mentioned, most DSLR cameras capture in 12-bit color depth (Nikon) or 14-bit color depth (newer Canon) in RAW mode, while JPEG only retains 8-bits of color depth.
It gets worse, because a committee of camera engineers decided how much sharpening, saturation, and other effects would automatically be applied to every JPEG capture your camera makes.
All your images have already been post processed, and you had no input on that processing. That's what you see when you look at them on your LCD. An image in a print format, not a format like a film negative that will require further processing.
Capturing images as RAW files gives you more control in post processing. In fact all RAW images
need post processing to one degree or another.
RAW converters leave RAW image files in a 16-bit color depth. When you do post processing you have all the pixel info to work with.
If you post process a JPEG you only have 1/3 the pixel data to work with.
Plus, each time you save a JPEG it throws away a little more pixel data. You won't notice anything amiss with a JPEG fine image saved at maximum quality till you hit 10 or so saves. Exactly how many depends on the image itself.
For output to the web your image has to be JPEG anyway. Many print labs will accept images files as TIFF's which is another image format that retains all the pixel data. RAW image data can't be printed or displayed on the web.
As it turns out a print made from a JPEG fine uploaded at maximum quality will be visually indistinguishable from a TIFF file that is 4 times larger, as long as that JPEG has only been saved a handful of times.
The bottom line is, JPEG makes DSLR photography pretty much the same as having an interchangeable lens, no shutter lag, feature rich P&S camera. Shooting RAW is like taking film and processing it in a dark room so the image turns out exactly the way you want it.
So, you bought a 12.2 MP, $1000 camera, and never see 8 MP the image sensor detected, because you record your images as JPEGs.
For more information on the JPEG image format visit
www.wikipedia.org and type "JPEG" in the search box. After perusing the JPEG page, type "RAW Image Format" into the search box and investigate the advantages/disadvantages of recording your images as RAW data.