4.0 ice cream sandwich - Internal storage, phone storage and SD card

I am new to Android (v4.0.4) and trying to understand it.

By looking at the storage setting, I found the followings are listed:

• Internal storage: total space 807MB



• Phone storage: total space 1.98GB


• SD card: total space 14.91GB ---- I put it in, a 16GB SD Card

Manufacturer says that it is a 1GB RAM + 4GB ROM phone.

1. 
   

   I am thinking that the Internal Storage and Phone Storage come from that 4GB ROM. Am I right? If I am right, where does another 1GB ROM go?

   
   


2. 
   

   It seems the Internal Storage is not available for me to install. It only list Phone Storage and SD Card as available locations. That Phone Storage seems not big enough for the life to install all apps on it. If I use SD Card as the location to install apps, the backup/recovery cannot include SD card. How you manage your phone's storages?