In order to edit raw pictures, you need Nikon Capture, which is a $100 software. You can download it free from Nikon's webiste, but it only has a 30 day time limit before you have to buy it. If you own PS CS2, there is a free Nikon raw plugin that you can download from Adobe's site. I am not sure if there is a Nikon raw plugin for PS CS. There probably is one for CS.
You can do a lot more with raw, but don't think it's easy to create magical pictures when you edit in raw mode. I don't normally use raw mode. There is a time and place to use raw. If you are having to take quick, action pictures, the raw format is a lot slower to shoot a picture and write it to the card. Your shooting speed will go down since the .nef file format is about 5 megs per pic when the Jpeg Fine/Large setting is around 3 megs. With raw, you can fix and change all of the white balance settings if you feel you used the wrong one, and you are able to fix under/overexposed pictures from the raw format to a certain degree just like if you were there to re-shoot the picture. My take is if you are good and familiar with your camera and know how to use the histogram/ highlights on the back of the Nikon camera using raw mode really isn't beneficial if you take a good shot the first time. Any kind of cool manipulation will have to be done in photoshop anyways. This is what raw is good for. If you want to take a cool pic of a landscap scene. And you want to capture the scene and expose one shot for the sky and another for the ground/landscape. At times, you can't really get a proper exposed picture where the mountains come out perfect and the sky comes out perfect. With raw, you take one raw pic. Go into Nikon Capture and manually change the exposure of the picture and properly expose the mountian if it is too dark. But then the sky gets blown out/ too bright. You save the file as mountain.tiff/jpeg. Then change your settings of the landscape raw pic back to the original setting and change the exposure within the Nikon Capture software to properly expose the sky and darken it to look cool but then the mountains end up getting to dark. Save the fine as sky.tiff/jpeg. You would then open up PS and you would merge the two pics together and mask out each section of the picture that didn't come out right. Now you have a perfectly exposed picture that could be never possible with a regular camera. Stuff like that the raw formats rocks, or if you want to take cool single pics of whatever you can always go into the picture within the raw format and change the white balance of the pic to change the look of the picture.
Nikon Capture
http://nikonimaging.com/global/produ.../nsa/trial.htm
PS CS2 raw plug-in
http://www.adobe.com/support/downloa...jsp?ftpID=3364