Define memory capacity

I can answer this de jure or de facto.

The definition most people refer to is just how many pictures your internal storage or flash card can store. For example, 8GB of photos on my CF card.

The proper definition of memory capacity is the internal RAM of any device which handles files as they're being processed. Think of it this way.. the processor is good at adding numbers, but can't remember any. If I tell you 2+3 your brain knows how to do addition, but what if you can't even remember the numbers "2" and "3"? That's what memory is for. In a camera this is often called an image buffer because you can take a few photos and even if they aren't stored permanently they can be in "limbo" in the camera and not be lost.