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The Canon 500D Close-up Lens is screwed onto the front of the lens like a filter, for quick and easy close-up photography. It utilizes two achromatic elements to correct chromatic aberrations. When you attach a close-up lens to your camera lens it acts a little like reading glasses for a far-sighted person. The camera is no longer able to focus on infinity, but it has a clear vision of close subjects that were previously outside its focusing range.
If you're travelling and space in your kitbag is critical, then you might prefer a close-up lens, which is much more compact than an extension tube. Otherwise, the choice depends largely on what lenses you have and what magnification you want to achieve with them. Close-up lenses have more effect when they are used on a camera lens with a long focal length than on shorter lenses. This is exactly opposite to the effect of extension tubes, where the amount of magnification decreases as the camera lens focal length increases. In practice, this means that extension tubes are more useful with short lenses (up to 100mm, for example) whereas close-up lenses are more useful with longer lenses.
When you require greater working distance, the combination of a telephoto lens with a close-up lens will usually be the best choice. If you use an extension tube on a wide-angle lens, you may find you're having to work extremely close to the subject to get it in focus. In addition, close-up lenses do not reduce the amount of light reaching the sensor, whereas extension tubes do. This can sometimes be critical when you need a reasonably fast shutter speed or a small aperture (or both).
If you have a long telephoto zoom, you can make good use of a close-up lens – and in practical terms it is a better option than using extension tubes with a telephoto lens. If you use extension tubes with zooms, you will find that the focus changes as you zoom in and out, which means you continually have to re-focus. This doesn't happen with close-up lenses. Once you have focused, you can change your composition by zooming in and out, just as you can with any zoom used normally. Always use the camera on a tripod – the increased magnification will also increase the effects of any camera shake.
If you have a macro lens, you can make good use of a close-up lens to bring about even larger magnifications, although a close-up lens typically loses effectiveness at shorter focal lengths (less than about 35mm). If you're aiming for really high magnifications, try using a macro lens + extension tubes + a close-up lens.
*For more information on using close-up lenses, including the Canon 500D, check out this very informative article on the Canon website.