The sensor in a digital camera is equivalent to a frame of film. They both capture light and use it to generate a picture, it is just the medium which changes: film uses light sensitive particles, digital uses light sensitive diodes. These specks of light work together to form a cohesive continuous tone picture when viewed from a distance.
One of the most confusing things about digital cameras is the concept of pixels. They are confusing because some people think they are a quantifiable entity. But here’s the thing, they aren’t. Typically a pixel, short for picture element, is a physical point in an image. It is the smallest single component of an image, and is square in shape – but it is just a unit of information, without a specific quantity, i.e. a pixel isn’t 1mm2. The interpreted size of a pixel depends largely on the device it is viewed on. The terms PPI (pixels per inch) and DPI (dots per inch) were introduced to relate the theoretical concept of a pixel to real-world resolution. PPI describes how many pixels there are in an image per inch of distance. DPI is used in printing, and varies from device to device because multiple dots are sometimes needed to create a single pixel.
But sensors don’t really have “pixels”. They have an array of cavities, better known as “photosites”, which are photo detectors that represent the pixels. When the shutter opens, each photosite collects light photons and stores them as electrical signals. When the exposure ends, the camera then assesses the signals and quantifies them as digital values, i.e. the things we call pixels. We tend to use the term pixel interchangeably with photosite in relation to the sensor because it has a direct association with the pixels in the image the camera creates. However a photosite is physical entity on the sensor surface, whereas pixels are abstract concepts. On a sensor, the term “pixel area” is used to describe the size of the space occupied by each photosite on the sensor. For example, a Fuji X-H1 has a pixel area of 15.05 µm² (micrometres²), which is *really* tiny.
NB: Sometimes you may see photosites called “sensor elements”, or sensels.