Ray tracing & Radiosity

"Ray tracing is an extension of the same technique developed in scanline rendering and ray casting. Like those, it handles complicated objects well, and the objects may be described mathematically. Unlike scanline and casting, ray tracing is almost always a Monte Carlo technique, that is one based on averaging a number of randomly generated samples from a model.
In this case, the samples are imaginary rays of light intersecting the viewpoint from the objects in the scene. It is primarily beneficial where complex and accurate rendering of shadows, refraction or reflection are issues.
In a final, production quality rendering of a ray traced work, multiple rays are generally shot for each pixel, and traced not just to the first object of intersection, but rather, through a number of sequential 'bounces', using the known laws of optics such as "angle of incidence equals angle of reflection" and more advanced laws that deal with refraction and surface roughness.
Once the ray either encounters a light source, or more probably once a set limiting number of bounces has been evaluated, then the surface illumination at that final point is evaluated using techniques described above, and the changes along the way through the various bounces evaluated to estimate a value observed at the point of view. This is all repeated for each sample, for each pixel."[1] to find out more...

"Radiosity is a global illumination algorithm used in 3D computer graphics rendering. Unlike direct illumination algorithms (such as ray tracing), which tend to simulate light reflecting only once off each surface, global illumination algorithms such as Radiosity simulate the many reflections of light around a scene, generally resulting in softer, more natural shadows.
As a rendering method, Radiosity was introduced in 1984 by researchers at Cornell University (C. Goral, K. E. Torrance, D. P. Greenberg and B. Battaile) in their paper "Modeling the interaction of light between diffuse surfaces". The theory had been in use in engineering to solve problems in radiative heat transfer since about 1950.
Notable commercial Radiosity engines have been Newtek's Lightwave internal render engine, Lightscape (now incorporated into the Autodesk 3D Studio Max internal render engine), and Radiozity by Auto*Des*Sys. Radiance, an open source Synthetic Image System that seeks physical accurate lightning effects, also makes use of the Radiosity method."[2] to find out more...

Passage [1] from http://en.wikipedia.org/wiki/Rendering_%28computer_graphics%29#Ray_tracing
Passage [2] from http://en.wikipedia.org/wiki/Radiosity