Smart Objects

It's important to note that the process of click-pushing an image from the Photo Bin into any (new) master document (in the main edit window) converts a pixel-based image into a feature called a Smart Object. You can also import an image by using the File>Place command.

Smart Objects are essentially non-destructive layers. This means that you can resize them at will and not damage the pixels—as you might when you resize a pixel-based image layer. They can be used in conjunction with Adjustment Layers and masks.

You can't perform operations that alter pixel data (such as painting, dodging, burning, or cloning) directly on a Smart Object layer unless it's first converted into a regular layer, 
a process called Simplify Layer—this changes its status from smart to pixels.

For many processes, a Smart Object has to be converted back to being just a pixel-based image—in fact, Elements will tell you when this is needed, but...