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"Royalty Free" simply means that you as the buyer pay a one time fee for the privilege of using the image as many times as you want to, and in as many ways as you can, within the limits of the user license you agree to at the time of purchase. This is what happens when I buy an image from iStockPhoto, for instance. I can use that image in my customer's website. I can also use it in their brochures and business cards for example. But I cannot resell it to someone else because I don't own the rights to the image. The image's creator does. I only own a limited right to use it.

"Royalty" means that you would pay a set amount for every use of the image. For instance, you would pay a fractional amount for its use in a printed piece, depending on how many pieces were printed. Or, you would have to pay a fractional amount for every time the website page on which the image appears was viewed by a unique viewer. Obviously this would be almost impossible to regulate. So image creators opt for the ability to charge you once for the image at a rate higher than would be customary in a royalty arrangement, and then grant you rights to use that image any number of ways within the general constraints of the license.

Like, Skiprr, I own a collection of purchased images. Mine is not so vast as his, but it probably constitutes $2k-$3k worth. And I have been contemplating offering some of my own images for sale at iStockPhoto. The advantage of services like theirs to guys like me is that I don't have to buy an entire CD's worth of images any longer just to get the 2 or 3 that I need for my project. I can buy them as needed, one at time, or dozens at a time.

I buy all of mine from iStockPhoto.com.