Photos that are transferred from an external device (such as digital camera, scanner, memory card, removable media, etc.) are stored in the photo storage area. The default location is "My Documents/Photozig Albums". You can choose a different photo storage location by clicking on "Options" in the Home screen, "Storage" tab, and "Change Storage Folder".
When you create an album with photos that are already stored in the computer hard disk, the photos are not copied in order to save disk space (the photos stay in the original folder location), but you can fully manage your photos after the "Get Photos" step.