Is an Adobe Photoshop Document. It is raster-based and the file’s size is finite. If you zoom in you'll see the pixel grid used to create it and it loses file data as its resized.
Also, in a PSD file it’s possible to edit a vector file, but in a more limited way.
On the other hand, AI files are Adobe Illustrator vector file format and remain scalable and editable without compression or loss. While raster elements can be incorporated into an AI file, the vector format allows for more control and versatility.
Moreover, in Adobe Illustrator we can open an raster-based graphic file, but it can only be opened as an embedded image that can not be edited.