Optical zoom measures the actual increase in the focal length of the lens. Focal length is the distance between the center of the lens and the image sensor. By moving the lens farther from the image sensor inside the camera body, the zoom increases because a smaller portion of the scene strikes the image sensor, resulting in magnification.
When using optical zoom, some digital cameras will have a smooth zoom, meaning you can stop at any point along the entire length of the zoom for a partial zoom. Some digital cameras will use distinctive stops along the length of the zoom, usually limiting you to between four and seven partial zoom positions.
The digital zoom measurement on a digital camera, to put it bluntly, is worthless under most shooting circumstances. Digital zoom is a technology where the camera shoots the photo and then crops and magnifies it to create an artificial close-up photo. This process requires magnifying or removing individual pixels, which can cause image quality degradation.
Most of the time you can perform functions equal to a digital zoom with photo-editing software on your computer after you shoot the photo. If you don’t have time for or access to editing software, you can use digital zoom to shoot at a high resolution and then create an artificial close-up by removing pixels and cropping the photo down to a lower resolution that still meets your printing needs. Obviously, the usefulness of digital zoom is limited to certain circumstances.
Source: about.com
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