RAW and JPEG are just different file formats that the camera can save data in. The main difference is that JPEG uses file compression while RAW does not. Depending on what you'll want to do with the pictures post-camera, you may decide that one format is better over the other under certain conditions and for certain uses. Many feel that RAW is the best format to save to because it doesn't compress the file like JPEG does and thus results in a higher quality. RAW is also easier to work with and make adjustments to in some cases.
The drawback to RAW is that it often results in very large files. It looks like the 20D allows you to save to both formats at once. So, if you save a single shot as RAW + JPEG (FINE) you'll end up with a 12.5 MB file. With your new PC dealing with that type of file shouldn't be a problem but you'll want to make sure you have plenty of memory cards on hand!
Deciding what you're going to do with the picture also will help determine what format you'll want to use. For example, if you wanted to post a snapshot on the web you probably wouldn't want to shoot in RAW. It just results in too large of a file to really be of use on the web. And that's even after you converted it to JPEG or GIF. Now, if you were going to do some nice portraits of your daughter to blow up and print to 8x10 or larger then RAW would be great.
I generally shoot in JPEG Fine because I'm happy with the results. I've printed this format up to 8x10 and have been very happy with the outcome.
I think you're going to love your new camera!