theory

All digital cameras work in a similar fashion. Some digital cameras may work a little differently but they all contain the basic hardware.
One similarity in all digital cameras is they all have a lens that projects an image onto a CCD (charge-coupled device). When a picture is taken software within the camera looks at the image three times-once each for red, green, and blue. Then it combines the three images as one RGB (Red, Green, Blue) image.
Another similarity in all digital cameras is they have a place to store the digital image. Although they all have a medium of storage the way the images are stored may vary. The images are not stored in the CCD. The CCD is analogous to the film in a traditional camera. The CCD is only used to capture the digital image. Pictures are usually stored in EPROM (Erasable, PROgrammable Memory) microchips. But, not all cameras store their images on EPROM. Some cameras may use PCMCIA cards to store pictures so that more memory may be added. Some cameras even use various media, like a 1.44MB diskette. For example, the Sony Digital Mavica stores its pictures on a 1.44MB diskette. One problem with cameras that store their pictures on diskettes is when a picture is taken the user must awhile for the camera to write the image file on the diskette. The user cannot take another picture until the camera is done writing the image on the diskette. All cameras have their advantages and disadvantages when it comes to storage.
Some cameras have a display screen which allows you to view all the pictures you have taken. While most digital cameras have this feature some do not. The advantage to having the display screen is that you can review the pictures you have taken and the ones you do not like you can delete. Without a display screen this feature it not available. Cameras with display screens are more superior to the ones without but, the cameras without display screens carry a very low price.

All cameras take pictures and save the images to a certain resolution. The resolution size for each picture taken may vary. A better camera will save the pictures at a higher resolution. You may be wondering 'What the heck is resolution?'. Well, resolution is the degree of sharpness of an image displayed on a computer screen or quality of printed output from a laser printer or photo or laser typesetter expressed in dpi (dots per inch). Resolution can also refer to the number of bits per pixel. In printing, resolution refers to the space between dots in a halftone screen and is expressed as lines per inch (lpi).
Now that you know the basic theory of how digital cameras work you may still not what digital actually means. Digital refers to the binary representation of data as bits and bytes. The binary representation of data is basically the language computers use to create, manage, and store information, like a picture. This language that the computers use is called binary code. Binary code is made up of two things we named one of there things 0's and the other 1's. When data is transferred through a cable on a computer it sends two different electronic pulses. One of these pulses is the 0 and the other is the 1. I suppose you could say that the computer only has two letters in its alphabet: the 0 and the 1. So, when you take a picture on a digital camera the image it stored as a combination of 0's and 1's.