A digital orthophoto is a computer-generated image of an aerial photograph or aerial digitial image in which displacements caused by camera orientation and terrain have been corrected and the image has been projected to a standardized map projection.
In other words, digital orthophotos are special photos because they have been processed to be spatially accurate.
Unlike most photos, orthophotos have a uniform scale across the entire photo area. That is, orthophotos are scalable in any direction. You can measure distances on orthophotos. The accuracy determined by the particular orthophoto project. Since most orthophotos are in a digital format, they can be shared and manipulated further, as well as integrated into various applications. They are not just pictures taken from an airplane which have distortion from many sources.
To make an orthophoto, the original aerial images are georeferenced and processed to remove virtually all the distortion due to terrain and camera position. That is, the raw images have been stretched to fit the ground terrain. Most of our orthophotos are taken from airplanes rather than satellites.
Orthophotography Definitions are helpful to understanding orthophotography and these pages.
The orthophotos have delivered a new standard for spatial accuracy. Read Integrating the Orthophotos With Existing Pima County GIS Data which includes a discussion of errors as well as a description of the relationship between our vector data and the orthophotos.
Ron Platt has provided a cookbook tutorial (in Microsoft Word format) for processing TINs and Contours in ArcView.