A Flash movie uses vectors to draw rather than bitmaps or pixels.
When you draw a line in Flash, the line is stored as a line between point A and point B. Additional information about the line such as its width, style, and color is also stored. Flash makes it easy to change the line, or vector, later. Programs such as Paint on the PC create bitmapped drawings. Photos are also considered bitmaps. When you draw a line in Paint, it is stored as a series of dots, or bits. You can change the color of the line, but it is not easy to change the style or length of the line. When you change the size of a vector based drawing, it scales very nicely. In fact, you cannot tell that the size has been changed. A bitmapped drawing does not scale well: when you increase the size you get a jagged line or steps.
You can import jpg, bmp, and gif files into Flash. (Animated gifs are imported with their animation as a series of bitmapped pictures.) Flash considers all of these formats as bitmaps. If you import Adobe Illustrator or wmf (Window Meta Files) files, they are imported as vector drawings. Be aware that when you use bitmap pictures, they will not scale well.