At the release of ArcGIS 9.2, two different libraries are used to read raster formats: RDO and GDAL.
With 9.2, all GDAL format rasters have an AUX.XML file created, that stores projection, statistics, and other additional information. RDO format rasters always use the AUX file but are also capable of using the AUX.XML format as well.
Since all versions prior to 9.2 just use the AUX file to store this information, there is no capability for these versions to read the AUX.XML; it is not backwards compatible. This is a known limit for GDAL rasters.
When trying to define a projection for GDAL rasters they will display properly in 9.2 but not in 9.1/9.0/8.X. RDO rasters should behave the same through all versions.
In short, GDAL rasters will have AUX.XML in 9.2. RDO rasters will always have AUX in all versions.
Prior to 9.2 all rasters were read using RDO.
The following are what is supported by GDAL and RDO at ArcGIS 9.2:
GDAL - BMP, GIF, JPEG, JPEG2000, MrSID, PNG, BIL, BIP, BSQ, ADRG, CADRG, PIX, BSB, DEM, XPM, ECW
RDO - GRID, IMG, TIFF,CIB, ASRP, USRP, DTED, ERM, LAN, RAW, CIT, COT, NITF