The camera can be used to take photographs.
"A twelve-shot, 35 mm, full-color, disposable camera with reinforced plastic casing for secure field operation, anti-fog lens, and a stealth design for quick concealment." - Jagged Alliance
The camera appears only once in Jagged Alliance, in the possession of Tex R. Colburn, who will bring it with him when you hire him.
While able to take pictures in both games, the camera has absolutely no apparent use in Jagged Alliance.
They find use in Deadly Games, however, as some missions require your mercenaries to obtain a photograph of an objective, either a person or an object. These missions will always provide the team with a camera for use during the mission.
Tex's camera can be used to acquire these objectives as well, if he is hired.