A native "Photoshop Document" is commonly abbreviated PSD, as this is the file extension. Adobe Photoshop is the most popular photo editing application in the graphic arts industry. Photoshop Elements, though quite robust, is a scaled down consumer version, lacking support for CMYK and other professional features.
Photoshop is capable of opening and saving images in a variety of formats. Camera RAW, JPEG, TIFF, PDF, PNG, and PSD are just a few. As one might expect, multiple layers, alpha channels, clipping paths, typography layers, and filters can be saved within PSD since this is the native file format. In the past, this was the only format that could retain all such image enhancements, so a PSD file was saved and a copy with flattened layers was saved as TIFF for use in page layout applications.
Adobe eventually began supporting PSD files within other applications within its Creative Suite. So it is now possible to include PSD within InDesign or Illustrator. This may cut down on file versions but PSD files can become quite large. For this reason, many professionals continue to prefer TIFF for placement within other documents.
What some may not realize is that, with a smaller file size, an LZW compressed TIFF can retain everything stored within PSD. LZW compression requires PostScript Level 3 print drivers for realtime decompression during printing. And not all applications support layered TIFF, though the most popular vendors, Adobe and Quark, do.
Large-format output generally requires sizable files. Saving layers, alpha channels, and effects can quickly increase documents to hundreds of megabytes. Therefore, Reactive Imaging prefers when images are sent, they be flattened TIFF instead of PSD. For most print jobs, PDF is the preferred file format.