Photo Mode vs. Built In Digital CameraPhoto Mode
A photo mode on your camcorder is a function that allows you to freeze a frame of video onto your video tape for a period of time, usually around 5 seconds. With a photo mode the picture is stored on your video tape, and if you take the picture while you are in the middle of videotaping an event the photo will interrupt your recorded video with a freeze frame.
I personally don't recommend ever using the photo mode on your camcorder. Once you freeze the frame of video using a photo mode there really is nothing you can do with it except watch 5 frozen seconds on your television.
If you want to create a digital still from your video to e-mail to friends or save on your computer you can import your video onto your computer and freeze a frame in any video editing program. By creating a digital still after recording your video you are able to preserve the quality of your recording as well as locate the exact moment you want to create a still of. Most editing programs will let you scroll through video by individual frame, so you can literally have any shot as a still that you want.
The resolution of stills taken using a photo mode or creating a still from your recorded video is pretty low. The pictures would be good to e-mail to friends but not to print out.
Built In Digital Camera
A camcorder that has a built in digital camera will have a memory card in addition to a tape. The memory card is where your digital pictures will be stored and you will generally download them onto your computer through a USB cable.
Built in digital cameras generally range in resolution from less than a megapixel. It's important to understand what resolution your pictures are going to be before you start taking pictures. In general anything under two megapixels is not going to be a good enough resolution for you to be able to print out.
If you like to take pictures then you will probably be better off carrying a digital still camera in addition to your camcorder for taking stills.
Another important thing to find out is whether or not your camcorder will allow you to take a photo while you are still recording video. Some digital cameras can take a picture and allow your camcorder to record video at the same time, others will interrupt recording in order to take a still.