Hello,
I have some questions regarding installation of wordpress through cPanel.
1) Should i install it in root directory or in subdirectory?
2) What exactly is the difference in the two?
3) Can i have more than one subdirectory on single domain when i am installing wordpress?
4) Will it have any effect on SEO?
5) www.digitalcamera.com/sony/some etc
1&2) That is really a matter of preference. I put the Wordpress files in a subdirectory, like /blog, just to keep the files out of the way. Then, if I want the front page on the site to be controlled by WP, I copy the index.php file from the subdirectory into the root directory and edit it to change the "./wp-blog-header.php" to "./blog/wp-blog-header.php". You'll also want to change the "Site address (URL)" in the General settings panel in your dashboard.
The only real difference I know of is that your WP files are cleanly contained in a subdirectory rather than all in the site root. That, and it's slightly easier to set up when it is in the site root.
3) Yes, you can have as many installations of WP on your site as you'd like, they just need to be in different directories. If you have more than a couple, it's probably worth looking into using the WP multisite options and running the various "sub blogs" off of one installation. The main advantage is that you can maintain and update everything in one dashboard rather than multiple dashboards. The main disadvantage is that things get more complex when setting things up and when updating themes/plugins to make sure it doesn't break one site while fixing another.
4) The search engines don't know that you're using multiple copies of WP or a single copy unless they are different versions. If you just want the keywords in the URL see the next answer.
5) The easiest way to get all the hierarchy in the URL is to use categories. You can define your top level categories as the highest level keywords then create other categories that use those as "parent" categories. So, to get your above URL you'd have a category of Sony and a post/page with the slug of "some" and the permalinks structure of /%category%/%postname%.
HTH