How does a digital camera works?

All you need to know about -A digital camera
Let's start from beginning

  The digital camera is one of the most remarkable instances of this shift because it is so truly different from its predecessor. Conventional cameras depend entirely on chemical and mechanical processes -- you don't even need electricity to operate them. On the other hand, all digital cameras have a built-in computer, and all of them record images electronically.

So here's one important fact !

Everything you are watching on your screen right now !

Is an illusion 

Yes , 

I am not kidding 

Everything here is just some million pixels working in a synchronised manner to produce the illusion of letters and '        '(Spaces) !

Hehehehe 

This is how you view everything in this Mordern world ! On screens !

Pixels, Pixels everywhere !!!

For more information view the last image below!

So digital camera is a great innovation or I may say invention by Steven Sasson

Now back to the working 

Let's say you want to take a picture and e mail it to a friend. To do this, you need the image to be represented in the language that computers recognize -- bits and bytes

Essentially, a digital image is just a long string of 1s and 0s that represent all the tiny colored dots -- or pixels -- that collectively make up the image. (For information on sampling and digital representations of data, see this explination of the digitization of sound waves. Digitizing light waves works in a similar way.)

And 

At its most basic level, this is all there is to a digital camera. Just like a conventinal camer , it has a series of lenses that focus light to create an image of a scene. But instead of focusing this light onto a piece of film, it focuses it onto a semiconductor device that records light electronically. A computer then breaks this electronic information down into digital data. All the fun and interesting features of digital cameras come as a direct result of this process.

Now

Each photosite on a CCD or CMOS chip is composed of a light-sensitive area made of crystal silicon in a photodiode which absorbs photons and releases electrons through the photoelectric effect. The electrons are stored in a well as an electrical charge that is accumulated over the length of the exposure. The charge that is generated is proportional to the number of photons that hit the sensor.

This electric charge is then transferred and converted to an analog voltage that is amplified and then sent to an Analog to Digital Converter where it is digitized (turned into a number).

This diagram  may further help you —

Photons from the sky are gathered by a telescope and focused on the sensor of a digital camera where photo-electrons are created, stored during an exposure, and finally digitized and turned into numbers that we work with on a computer.

Digital cameras sample light from our world, or outer space, spatially, tonally and by time. Spatial sampling means the angle of view that the camera sees is broken down into the rectangular grid of pixels. Tonal sampling means the continuously varying tones of brightness in nature are broken down into individual discrete steps of tone. If there are enough samples, both spatially and tonally, we perceive it as faithful representation of the original scene. Time sampling means we make an exposure of a given duration.

Our eyes also sample the world in a way that can be thought of as a "time exposure", usually on a relatively short basis of a few tenths of a second when the light levels are high as in the daytime. Under low light conditions, the eye's exposure, or integration time can increase to several seconds. This is why we can see more details through a telescope if we stare at a faint object for a period of time.

A digitized image is made up of a grid of pixels which are represented by numbers. The numbers specify the pixel's location in the grid, and the brightness of the red, green and blue color channels.