Lightroom does nondestructive edits by never changing the original files; all "edits" are recorded in the catalog. If you want to see these changes outside of LR, you need to "export" the edits to a new image file, or select "edit in..." to save the LR edits and open a new file in a different editor.
Photoshop, too, does not make changes to your raw files. The raw file gets read and saved to a PSD file.
The communication between LR and PS or LR and any other editor is limited due to the design of nondestructive edits never updating the original files.
The PSD is not referencing the original raw file. The PSD is an independent file created by Photoshop that contains all of the Photoshop adjustments that were made up to the point when the file was saved. The PSD is not connected to the original raw file. Therefore, adjustments made to the original raw file cannot/will not be reflected in a previously created PSD file.
Thanks for the replies. I understand that original RAW files aren't modified by Lightroom/ACR and all adjustments are stored in the database file. However, by opening a RAW file in Photoshop from within Lightroom as a smart-object, I am still able to make adjustments at the "RAW level" using ACR by double-clicking the bottom-most layer. So I can open a RAW file as a smart-object, make destructive edits in PS, save the file as PSD, then re-open it and still have the ability to perform "RAW" adjustments on the original file. So I guess what I'm wondering is, are these adjustments saved inside the PSD file or something like an ACR database?
Inside the PSD. Photoshop does all its saving to the PSD file, which technically makes it destructive editing. Yes, with a smart object, you can get the raw file back to its original state. However, Photoshop is not talking to any other app or database.
To view the edits you have made to a RAW file in LR in Adobe Camera RAW you have to save those LR edits to either a XMP Sidecar file or to the file itself if you are using the DNG file format. To do that automatically in the Catalog preferences you have to check the option to Auto Write changes to XMP.
Then when you open that RAW image in ACR you will see the changes. If you make further change to that RAW file in ACR when you get back to LR you might have to Load those change into LR.