Please read this (in particular the section titled "Supply pertinent information for quicker answers"):
In Photoshop did you use Adjustment Layers?
Did you view the image at View > 100%?
Could you please post a screenshot taken at View > 100% and with the pertinent Panels (Layers, Channels, Options Bar, …) visible?
Does turning off »Use Graphics Processor« in the Performance Preferences (Photoshop > Preferences > Performance > Graphic Processor Settings) and restarting Photoshop have any bearing on the issue?
Where does the second screenshot come from? Which application/photo viewer is that?
Banding like this happens when you don't have sufficient bit depth, somewhere in the pipeline. 8-bit data only have 256 individual discrete levels, and if you twist those levels in an extreme adjustment you still only have 256 levels - but they are now much further apart. So you get visual stepping.
The first thing is to always open in 16-bit depth from ACR, not 8-bit. A 16 bit file has 32 000-ish individual levels and no banding in the image data.
Banding can also happen in the adjustment itself - if you are using a selection to do the adjustment. Selections are always 8 bit, even in a 16 bit file. This is just a historical leftover (that will hopefully one day be history altogether).
Finally, there can be banding in the display system - calibration correction tables, the monitor profile, the video driver, or the panel itself. The video pipeline is also limited to 8-bit color depth. An application/viewer without color management bypasses some of these.
Finally, all these can work together and exaggerate the issue. I suspect that's happening here.
The second screenshot came from Lightroom. I viewed the Photoshop saved image in Lightroom. I think this problem only shows up when the view scale is small. Don't know how to fix this though.
But I wonder why there is no such problem in Lightroom. Lightroom shows the true colours even with very small images.
OK, thanks for reporting back. This is a bit odd, and I can't say I've run into this particular issue before. It does sound like a combination of 8-bit preview at small sizes and a video driver inaccuracy.
Just out of curiosity - can you try to set GPU to "Basic" mode in PS Preferences? This shifts display color management from the GPU back to the CPU, which is the traditional and often more reliable way. I have a hunch that might display correctly, although you may lose some advanced features.
The "Basic" mode didn't work still. Could you please download the raw file and open it on your PC with Photoshop? Create an Adjustment Layer of Brightness/Contrast and bring down the brightness. I want to know if this is a common problem or it just happens on my machine due to the banding issue you talked about. Thanks very much!
Please click "download" to download the original raw file, not "Save image as", which will make it a JPEG.