Getting carried away with the digital stuff and forgetting some basic photography!
Shyer has raised a very useful subject - depth-of-field...
Basically:
- wider aperture = narrower depth of field (and shorter exposure times)
- smaller aperture = greater depth of field (and longer exposure times)
For some shots, such as your insect above, having a narrow depth-of-field gives you a soft, fuzzy background, allowing the sharp image of the subject to stand out and draw the viewer's attention.
In other shots, having a very great depth-of-field is necessary to produce the desired result. Some of these are macro shots of the foreground subject, but with in-focus backgrounds. They can make for some very interesting pictures.
Getting technical ... depth-of-field is the range of distances where an image appears to be sharp.
I say 'appears' because an image is only ever focussed at a single distance. Any part of a subject closer or further away from the plane of focus will become progressively 'fuzzier'. The size of the aperture affects the rate at which this fuzziness occurs with change of distance. The smaller the aperture, the lower the rate of 'fuzziness' and the greater the depth-of-field.
However, while that fuzziness doesn't spill over into a neighbouring pixel on the sensor (for digital cameras) that part of the image will still look as sharp as it would be if it was directly focussed on. Even when this 'spilling over' does occur, the number of pixels that can be affected, yet still display a 'sharp' image, will depend on the resolution of the image, cropping, degree of enlargement, viewer distance and things like that. (The same principles apply to film cameras - but the grain size of the film is the equivalent to the pixel size in a digital camera.)
One other thing - if you have depth-of-field markings on your camera, understand they are only a suggestion as to the acceptable range. If you were to take photos that require high sharpness and were blown up to large sizes, you would soon see that this depth-of-field scale was far too generous - and you would need to observe a narrower scale for acceptable results.
So, while the maths and the physics show that true sharpness through the 'depth-of-field' is not the case, the human eye is the only thing that really counts - so that means it is real.