I went to school for printing, and I work at a printing company as Prepress Manager/Color Management Specialist. Unlike some of the beer knowledge I do my best to spout, I feel 110% correct in my ability to answer this question:
First, lets define the terms:
Raster:
A raster image is made up of pixels. The resolution of a raster image is based on ppi (pixels per inch), and therefore device independent. In the printing industry, when we refer to a raster image, it is usually a continuous tone image (picture). Resolution is very important when dealing with raster images. A high resolution image is crisp and will print clean. The printing industry usually likes to see 300 ppi images. This is because our presses are capable of producing an image with a lpi (lines per inch) of 1/2 the dpi of an image. Additionally, you can't siimply go into Photoshop and make a 72 dpi photo 300 ppi. Yes, the program will let you do it. That does not make your photo 300 ppi!
Photoshop (and Gimp) are raster image editors. In a perfect world, everyone would only use Photoshop to edit photos. This is what the program was intended for. They have added some vector functionality to the program. IMO, it doesn't work well. Unless you REALLY know what you are doing, Photoshop will rasterize all of your vector art anyways. Trust me, I see this EVERY day!
Vector
Vector art is considered "device dependent". Vector art, as mentioned above is based on algorithms. You can make a vector image 200 feet or .0625 inches. It does not matter. The resolution of a vector image is not set until it is sent to an output device. This doesn't seem significant if you are outputting to a inkjet at home. We output our art to an imagesetter, which images film at 2400 dpi.There are some new lasers that can image around 4000 dpi.
When I get a file, I like all text to be vector. The lines are crisp, and my artists can trap and add strokes to them if they are under spec. Once you get the hang of it, vector art is a LOT easier than raster. You can draw shapes, resize at will, change colors easily and much more. Also, vector program s like Illustrator dont work on layers like Photoshop. Anyone that has designed in Photoshop knows that it puts text on separate layers. You have to have that layer selected to move a line of text. In Illustrator, you can grab any object, or text and move it without selecting its layer.
How this applies to you
Obviously, you are designing labels that will likely be output on a consumer inkjet printer, or even office laser printer. Do you have to have 300 ppi photos and all vector text/art? Probably not. Long answer short, each program is designed for a specific type image. Edit your photos in Photoshop or Gimp. Import those images (at the correct size and resolution) into Illustrator (or Inkscape). Then, design the rest of your label. You don't have to make a raster image vector either, unless you are looking for a cartoony effect in a picture.