There is only one picture. It is in the camera roll. When you make an album, you simply create a new way to access that exact same picture.
It is the same as the music in your itunes library. The song is in the library. That exact same song can be in a playlist. If you delete it from the library, it will be gone from the playlist as well.
This is how photos work as well. All photos taken with iphone are stored in the camera roll. Albums are simply playlists from which you can access selected photos from the camera roll.