Hi TurquoiseBlue
Welcome to Apple Support Communities!
I will be happy to help you today.
So what I will do is explain the difference and if you have any other issue I will respond to them ASAP.
Camera Roll: This is every photo that has been take on this device and once it is deleted I will be deleted from all folders on that Phone however it will be backed up to iCloud Photos if it is enabled on your device.
My Photo Stream: This is a place where every photo you have taken in the last 30 days (with I think a limit of 10,000) are stored. The images here are all images taken on any device that used the same iCloud/Apple iD as the phone. So this means that if you took a picture on your iPod 15 days and it uses the same account as your iPhone the image taken will be on your iPhone and any other iOS and Mac OS X device that have the same account under Photo Stream. My Photo Stream is basically the Cloud storage of images.
Photo Albums: Consist of all images from the Camera role that have also been placed into an album. So if you want to sort some images from the camera role and have them in folders such as wedding, birthdays e.c.t these images will be there AND in the Camera role. If you delete the images from an album other than Camera role the images will go from that folder but will remain in the Camera role. If you delete an image from the Camera Role it will be removed from Camera Role and any other folder that is created.
Basically photos work like a flow chart.
Image Taken ⇒ Camera Role.
If there is iCloud Photos on: image ⇒ Photo Stream and therefore accessible on another iOS/Mac OS X device using same iCloud/Apple iD.
Just to repeat as I know this is crucial and important information.
If an image is deleted from Camera Role that image is wiped from the device. However there is still a copy of that photo in iCloud Photos but remember those images are only there for 30 days so don't rely on it to keep that image.
Delete an image from photo stream it is wiped from the iCloud sync of that image to all iOS/Mac OS X device using iCloud Photos using same iCloud/Apple iD. YOU WILL STILL HAVE THAT IMAGE IN CAMERA ROLE HOWEVER.
Photo Albums. Delete an image there and it will be removed JUST from the folder. Delete and image from Camera Role that is also in a folder and it will be wiped from the Camera role and Photo Album. However there is still a copy of that photo in iCloud Photos but remember those images are only there for 30 days so don't rely on it to keep that image.
Just quickly iCloud Photos is a way of keeping a cloud copy of those photos on all your iOS/Mac OS X device using the same iCloud/Apple iD as I am sure you have worked out already.
With iCloud Photos you can also share images using a shared photo stream where people can add, comment and like images there.
In short don't rely on iCloud Photos to keep an image if you want to delete an image from the photo stream because most likely when you will want the image, it will be gone.
Of course Apple might explain it better than me and so this link should verify what I said and reinforce what iCloud Photos does: http://www.apple.com/icloud/icloud-photo-sharing.html
Many Thanks and I look forward to hearing from you soon!
iBenjamin Crowley