Pixelated Text and drawings in Photoshop

First off I am very new to photoshop. I think I have made a simple settings mistake but for the life of me I can not find out what I have done wrong.

I am trying to add some simple text to an image, but I noticed that all the text is pixelated (I am not sure if that is the world). The edges look jagged, it looks like a raster image. I was under the impression that text in photoshop is vector. So I am not sure of what is happening. Have a look at a screen shot to understand what I am talking about. I have uploaded the image to <http://i43.tinypic.com/2ujl4cg.jpg>

After which I tried to create some shapes. But all them also look pixelated/jagged. You can have a look at what I am talking about by going to <http://i43.tinypic.com/awb3va.jpg>

I tried to create the circle with the Ellipse tool as well as the the marquee tool and tried to fill it. But both the methods gave the same result.

I am not sure what is happening. Any one have any idea how I can fix this?

Any help would be greatly appreciated.

Thanks
John

Both images you are zoomed in at 600%. Zooming in past 100% will allow you to see the pixels at the edge of an object. CS4 has added a grid if you will that allows you to see where pixels would be in an image.
For the text you have the edges set to sharp. That is a very minimum amount of anti-aliasing applied to the text. The greater amount of anti-aliasing that is applied to the text the more blurred the edges become therefore reducing the amount of jaggies or stair-stepping that you can visually see at 100%.

Thanks for the quick reply.

I understand what you are saying. But to make sure that I better understand how Photoshop deals with text. Text in Photoshop is not vector based. right? If it is shouldn't it work the exact same way as illustrator?

The best way to get sharper text is to make sure that Anti-Aliasing is set to sharp or crisp. There is no way to deal with small areas, since the marquee tool also becomes pixelated at smaller sizes?

Thanks in advance
John

Work at a higher resolution, say 300 ppi. (example: 4" × 4" might be 1200px × 1200px)

Create as many objects as possible with vector-based shape layers as opposed to raster-based marquee selections.

View at 100%.