Here is how I understand it: DPI has to do with printing, and PPI has to do with screen resolution. WHen I bring a photo into Photoshop Elements, it defaults to 72 PPI, but the size (look at your rulers) is huge. I create a new document at 300 PPI for a layout and drag the photo into it and it changes to 300 PPI to match the document and becomes a more reasonable size.
DPI and PPI are relative--more dots per inch is better resolution for a given print size (up to a point--at some point we just can't see the difference) but it's meaningless unless you know the measurement in inches since it's a ratio.
Does that make any sense? Your cameras give you pictures of a given absolute number of pixels (my 40D gives me 3892 x 2896), plenty of pixels for any reasonable sized photo. If you take those pixels and spread them out over a billboard, you'll see lower resolution because your pixels per inch will be much smaller than if you spread the same pixels out over an 8 x 10 print.
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