Primary External Editor Settings in Photoshop

For the file format, you will have two choices:
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TIFF (Tag Image File Format) or PSD (Photoshop Document). This seems like a no brainer since we are working with two Adobe Products and Photoshop happens to be one of the Applications we are working with. Logic says to use PSD, right? Logic be damned!
Adobe Engineers themselves have suggested, along with other leaders in the industry, that the best file type to use is the TIFF file format. When you choose PSD, you are warned how PSD files can be less efficient than TIFF files with respect to metadata updates. Also, make sure “Maximize Compatibility” checkbox is clicked on. But why bother with all of this?!?
Save yourself the headaches and use the TIFF file format. All of your layers will be saved and in tact for further processing down the road.
source: internet
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