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main difference is that illustrator uses vectors whereas photoshop uses pixels. illustrator utilizes paths to draw an image, a bit trickier to use imo than photoshop, although if you're already familiar with the pen tool in photoshop than you should have too many problems.
roxio toast titanium has a program within a bundle called Disc Cover RE that lets u make custom jewel cases and labels for CD, DVD's, etc.... its what i use when i just want a simple cover.