Explanation of how a webcam works
Webcams, like most things, range from simple to complex. If you understand the essence of a simple Webcam setup, increasing the complexity is only a matter of adding functionality through software, custom code and/or equipment connections.
A simple Webcam setup consists of a digital camera attached to your computer, typically through the USB port. The camera part of the Webcam setup is just a digital camera -- there's really nothing special going on there. The "Webcam" nature of the camera comes with the software. Webcam software "grabs a frame" from the digital camera at a preset interval (for example, the software might grab a still image from the camera once every 30 seconds) and transfers it to another location for viewing.
If you're interested in using your Webcam for streaming video, you'll want a Webcam system with a high frame rate. Frame rate indicates the number of pictures the software can grab and transfer in one second. For streaming video, you need a minimum rate of at least 15 frames per second (fps), and 30 fps is ideal. To achieve high frame rates, you need a high-speed Internet connection.
Once it captures a frame, the software broadcasts the image over your Internet connection. There are several broadcast methods. Using the most common method, the software turns that image into a JPEG file and uploads it to a Web server using File Transfer Protocol (FTP). You can place a JPEG image on any Web page.
If you don't have your own Web server, lots of companies offer you a free place to upload your images, saving you the trouble of having to set up and maintain a Web server or a hosted Web site. Which takes up a lot of bandwidth.
This is the simplest possible Webcam.