Hi eash,
The oystercards are all the same, but you can put different kinds of tickets on them. If you make a regular journey in to work on the tube or bus, for example, it's probably cheapest to put a season ticket (weekly/monthly/annual travelcard or buss pass) on it. But if you only make occasional journeys its cheaper to put cash on it, as a pre-pay ammount to use as and when.
The deposit is so that if your card gets lost or stolen, then they can see what ticket and/or money was left on the card, and then you can be issued with a new one with the same ammount on it.
I have one, but only make a couple of journeys a week on public transport, so I use pre-pay on mine. I used to top up the value using a credit card online (you can also do it over the phone, and at stations), but switched to the auto top-up when they introduced that. Now if the balance on my card falls below �5, it automatically gets topped-up next time I swipe the card. Its definitely worth getting one if only so you'll never have to queue up to buy a ticket again!