Most advanced Nikon cameras offer JPEG, TIFF, and RAW (NEF) storage. The argument over which bit level to choose generally goes along with which image format should one choose? The image format question is addressed in a different article found here.
However, this particular article does one simple thing. It discusses the math of image bit-depth in a simplified manner, as follows:
An 8-bit JPEG can capture over 16 million colors. However, it can only capture 256 unique colors per RGB channel. That’s 256 reds (R), 256 greens (G), and 256 blues (B). When you combine all three channels (all the shades you have) you will see this: 256 x 256 x 256 = 16,777,216 colors.
A 12-bit RAW file can contain 4096 colors per RGB channel or over 68 billion colors. When you combine the RGB channels you have: 4096 x 4096 x 4096 = 68,719,476,736 colors.
A 14-bit RAW file can contain 16,385 colors per RGB channel or over 4 trillion shades. When you combine the RGB channels you have: 16385 x 16385 x 16385 = 4,398,851,866,625 colors.
A JPEG file can contain a high degree of color compression while still maintaining proper luminance levels so that the image looks great. It just cannot be modified over and over and resaved without degrading from compression losses.
I would shoot in 14-bit RAW mode and take advantage of all those potential color storage bits (for subjects that need it) and later make a conversion to JPEG from my vastly superior RAW container. It is especially important to do so if you plan on using data from the low-order bits (darker areas in the image) for maximum dynamic range. I prefer 14-bit RAW files for those times I have the time and need to post-process images, a must when I shoot my commercial work.
As to which is visually better, 8-, 12-, or 14-bit files, this will always be highly subjective because we all see differently. I am speaking about "potential" color in this article. If there are not 4.3 trillion shades available, such as when one is shooting something like a red balloon against a black wall, would it really make any difference?
However, if one is shooting a magnificent landscape with colors of all sorts and a huge dynamic range potential, the number of bits can make a big difference in the final look of the image.
A 14-bit RAW to 8-bit JPEG conversion, in computer, seems nicer to me than a straight 8-bit JPEG out of the camera. Using as many bits as your camera can possibly record with will give your images an edge. When you decide to make a masterpiece JPEG from your RAW file, you will have more color levels to choose from and, therefore, less compression banding to deal with in the final image.
Moral of the story: Shoot and store your images as RAW files; find the time, extra disk space, a good calibrated monitor, patience and will to learn good post-processing technique. You will be rewarded with great detail in the shadows and exquisite tonal range, even if your final image is a JPEG file.
Keep on capturing time…