It's dificult to come with a short answer to this I'm afraid

Uhmm I'll give it a go, but I don't know all the details x)
There are two ways of making digital graphic, with "pixels" (also called raster I think) or with vectors.
Pixels is what photoshop works with, something that looks edgy and bad quality when you zoom in or try to scale it up or down. What vectors are are mathematical curves so it can be scaled as much as you want to and you can zoom in infinitely and it'll still not look pixelated. people usually makes logos in Adobe Illustrator since it works with vectors.
Well on the thing with rasterizing. Photoshop can actually also have vectors in it, that's what it does when you make a shape, you can see there's this vector mask on. But you can't do any effects with these types of shapes with such a mask on so when you rasterize it, you simply make it pixels only, no mathematical curves - though this unlocks the layer so you can put on different effects and play around with it!
You can also rasterize layers that has applied blending options to make the blending options a "part" of the layer if you understand?
That's what I've heard, all from personal experience and such, hope it's correct xD