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Orthorectification is the process of removing distortions in imagery caused by the sensor and terrain to create a planimetric image at every location with consistent scale across all parts of the image. More information about orthorectification is available in the following help topic: Fundamentals of orthorectifying a raster dataset.
One of the strengths of a raster product is the ability to orthorectify the imagery if an RPC file is included. ArcGIS is designed to automatically consume the RPC file, if one is available, by applying the Geometric Function. Until a DEM is supplied, the orthorectification is based on a constant elevation. The Geometric Function is automatically applied both when working with a raster product directly, and when adding it to a mosaic dataset. More information is available from the following help topic: Geometric function.
Orthorectification is only possible if the raster product includes a Rational Polynomial Coefficient (RPC) file, which contains all the necessary information to use in conjunction with elevation data to orthorectify imagery. More information about the RPC file can be found in the following help topic: Fundamentals of orthorectifying a raster dataset. In addition to the RPC file, having a DEM to use produces the most accurate results. A constant elevation value, such as the average elevation, can be used in place of a DEM, but the results may not be as accurate.
To take advantage of a raster product in a mosaic dataset, it is necessary to specify the correct Product Definition and Raster Type.