Insert EPS figures in LaTeX

Problem

Figures can be inserted easily into a LaTeX document by using the includegraphics command. But, if a figure in the Encapsulated PostScript (EPS) format is inserted using this command, LaTeX produces this error:

! LaTeX Error: Unknown graphics extension: .eps.

Solution

This error is because LaTeX does not understand the EPS format. One way to solve this problem is to include the epstopdf package at the beginning of the LaTeX document:

\usepackage{epstopdf}

This package automatically converts the included EPS file to a PDF. A foo.eps is converted to a foo-eps-converted-to.pdf by this package and it is included in the place of the EPS file. All of this is done automatically without any user intervention and the LaTeX file compiles successfully.

Tried with: MikTeX 2.9 on Windows 7 64-bit