No, it is not a raw file. Photoshop is just indicating where the image data came from, therefore you see the name of the raw file. Photoshop, by itself, is not capable of editing raw image data. When you transfer a file from Lightroom to Photoshop Camera Raw interprets the changes and adjustments you have made and then converts the image to an RGB image that Photoshop can handle. When you finish your work in Photoshop the file will then be saved as a PSD.
Thanks for taking the time and trouble to answer my query. For whatever reason I was unable to edit the background layer regardless of how many times and ways I tried. It was my first day with Photoshop CC being more used to lightroom 5 to elements. When using that a conversion on screen takes place before editing and was assuming that it was that process that was missing. However all now seems well. Thanks again.