An outline font (e.g. PostScript, TrueType) can be scaled to any size and otherwise transformed more easily than a bitmap font, and with more attractive results, though this requires a lot of numerical processing. The result of transforming a character in an outline font in a particular way is often saved as a bitmap in a font cache to avoid repeating the calculations if that character is to be drawn again.
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Article based on outline font at FOLDOC.