Was watching some videos/tutorials last night on the app Photogene and the fellow there made it even simpler for people to understand.
If you open any song in iTunes it tells you the name of the track. If you select a track and then info it tells you the author, date, album, track number etc. this is basically meta data for music and is pretty standard industry wide, the meta data for photography is also industry wide and along the same idea only has information about the image like the lens, f-stop, shutter speed etc or the size in pixels, format, aspect ratio, ego location etc.
Apps like PhotoSpector or Photo Shack will let you add or edit the meta data. Both of these apps do not copy your image from cameraroll but create a thumbnail which references the original image in photoroll and tags or other edits to the meta data are on the thumbnail. Other apps like Photo Manager Pro copy your image from photoroll and any tags or other edits to the meta data are attached to the copy. In both cases if you export your image from these apps the changes for the meta data goes along with the picture. If you export from photoroll it will not have that changed data.
The reason we have the two types of apps that allow you to add tags or other meta data is because Apple will not allow other apps to alter the meta data of any image in photoroll.
If you want to watch the video go here, it runs about 3-1/2 minutes but he explains it really well
The video is specific to Photogene, other apps will edit in different manners