I'll give this a shot. I believe most digital cameras output a file at 72 ppi. However this only relates to print size. For example, with an 8 Mbit file:
3504 x 2336 pixels
48.667 inches by 32.444 inches @ 72 ppi
is exactly the same file size as:
3504 x 2336 pixels
11.68 inches by 7.787 inches @ 300 ppi
This option basically tells programs like Photoshop what print size resolution it should use when opening the file. It does not actually change the size of the photo that comes out of the camera. Does that make sense?
Personally I have mine set at 200 because that is the resolution we use at the paper.