I've always been confused about the same thing. I understand that the field of view is what is different making the effective focal length different. But that's for an FX lens on a DX camera right? The whole point of a DX lens is that it is made for the crop sensor....right? So in reality does that mean that the 18-200 is really physically 12-133 and the crop sensor makes it 18-200 or is the 18-200 optically 18-200 and it's equivalent field of view on my D90 is 27-300? If it's the latter...what's the point of a DX lens.
Who's on first and what's on second?
The only difference between an FX and DX lens (or EF and EF-S lens, if you're a Canon junkie), is the size of the image circle that it projects onto the plane of the sensor. FX and EF lenses project a circle large enough to cover a standard 35mm still camera "film" frame of about 36mm x 24mm. The DX and EF-S lenses project a smaller image circle, suitable for their respective maker's "APS-C" sized sensors.
The focal length of the lens is ALWAYS presented as the actual focal length of the lens, which is the distance from the focal point, where all light paths converge, to the film/sensor plane. So an FX 200mm is the same as a DX 200mm. What is different is the actual internal construction. With Nikon, you can mount a DX lens on an FX body, but you will at the least get some vignetting at the corners, since the image circle can't cover the whole frame. Canon makes it impossible to mount an EF-S lens on an EF (full frame) body.
The "crop" factor is due to the smaller size of the APS-C sensor. Imagine an image where you have four friends faces, evenly spaced across the image. Think of this as the "full frame" of the image. Now, if you crop in a box with about 40% of the total area, and place it over the center of the above image, you'll only pick up the center two persons in the image. This is what "effective focal length" is all about. Nothing more. So, if you had a D3 (full frame sensor), and a 50mm prime lens, you'd get a picture of all four friends, but with the SAME lens, on a D90 (APS-C sensor), the sensor only "sees" the middle two people, if you don't change your distance from the group.
This is, in fact, nothing new in photography. It's only "new" in the sense that you now have cameras that approximate the physical size of a 35mm film camera with different size image sensors. In the old days, a 35mm film camera would have a "normal" lens of about 50mm, but if you took photos with medium format (much larger film and image size), your "normal" lens went to around 85 to 95 mm. These differences in focal length approximated the same field of view on each film format.
The "point" of a DX or EF-S lens is that they can be made smaller, lighter, and probably cheaper than a comparable FX or EF lens. Less glass is needed in a lens that will be projecting a smaller image circle. Since most people with an APS-C sensor camera will stick with an APS-C sensor camera when they upgrade (if they do), there's a market for them.
Most of the really good lenses, though, will be in full frame format, so they can be used on the full frame digitals, and the film cameras (yes, Nikon and Canon still make film cameras).
If you have plans, or think you may have plans to ever upgrade to a full-frame sensor camera, it makes sense to buy only the FX or EF lenses.

