There are two steps.
iPhoto always keeps a copy of your original photograph.
For example, let's say you edited a photograph last night.
Today, you open the photograph.
Yech!
The edited photograph doesn't look as good as it did late last night.
What do you do?
You can go back to the copy of the original.
In iPhoto, to revert to the original photograph, do the following.
1) Select the photograph.
2) Go to Photos > Revert to Original.
Now, photographers are often distrustful of any software that purports to preserve their original photographs.
You may want to do as they do.
Make a duplicate of the photograph before you edit it.
In iPhoto, do the following.
1) Click the thumbnail of the photograph.
2) Go to Photos > Duplicate, or press Cmd + d.
Then, rename the duplicate photo.
3) Click the thumbnail of the photograph.
4) Enter a new name in the Title box.
If you don't see the Title box, click the Info button.
There's a second advantage for making a duplicate.
You can compare the original photograph to the edited duplicate.
You have before and after versions.
Do the following to open a photograph file from Library Folders in iPhoto, such as the duplicate of the original.
1) Open iPhoto.
2) Browse in Library Folders to the thumbnail of your photograph file.
3) Click the thumbnail, hold, and drag it onto the Photoshop Elements icon (silver camera) in the Dock at the bottom of the screen.
iPhoto normally has a single library for your photographs.
You can create multiple libraries with iPhoto Buddy.
When you double click a photograph file, your computer is set to use a certain program to open the file.
This default setting isn't Photoshop Elements.
If you'd like to double click the thumbnail of a photograph, and have it open in Photoshop Elements, go to Open With.
The thumbnails in Library Folders link to your photograph files.
The actual photograph files are located in Pictures.
To go to the actual files, do the following.
1) Press Cmd + n to open a Finder window.
2) Double click Pictures and go to iPhoto Library.
Pictures is located in the bottom half of the sidebar on the left side of the Finder window.
Do not edit, delete, add new files, or most anything else, to the files.
Use iPhoto to do the above.
If you don't use iPhoto, it won't know what you've done to the files, and will become confused.