I am wondering if some digital cameras retain a copy of all photos taken in addition to the memory card?

I discovered an area on my digital camera called "gallery" and it was an album of every photo ever taken on my camera included photos I had deleted from my memory card. Were these deleted photos from my memory card or my camera?
My camera is a Sony DSC-N2
I am not referring to the software that came with my camera because the camera was the one on display and was actually missing the instructions, software and wrist strap when I purchased it.

I'm looking for a good point and shoot digital camera, that is water proof, takes video (longer than 10 seconds), I also want it to be able to take good indoor/darker photos because I don't want to lug my Cannon XS around all the time.
Here are some links I found...but I'm still stuck.

http://www.dpreview.com/reviews/Q209waterproofgroup/

http://www.gizmodo.com.au/2009/09/panasonic-lumix-dmc-ts1-waterproof-camera-review/

http://reviews.photographyreview.com/blog/outdoor-waterproof-digital-cameras/

http://www.digitalcamera-hq.com/digital-cameras/waterproof-camera-reviews_roundup.html

http://gizmodo.com/5232843/toughcam-battle-canon-powershot-d10-vs-panasonic-lumix-dmc+ts1

I would prefer it to be under 300, more like 200. But I can normally find a good sale to take it down a bit.
I keep thinking the Pansonic, but I read the video is hard to work with and the indoor stinks. But then I thought about the Olympus and I don't know.
Help me make a good decision?