Has nothing to do with Corporal_Hicks said, that is for auto-uploading and backup of photos that you have taken.
Are you sure you are not using the front facing camera but the back one? Try Resetting the Camera in the Settings under: Settings > Applications > Photos + Camera, and if that doesn't work, a soft reset (pressing the volume down and power buttons together at the same time until the phone vibrates).
Let us know how you get on.