This is a more complicated question than you may expect because photographs are one of the areas where Apple had to sort of retrofit functionality into its music player when it decided that iTunes was going to be the computer sync tool for the iPhone. I mean, it makes sense in most cases and iTunes does a great job of managing my music, but video, so so, and photos, awkward, at best.

I have both iPhoto and Aperture on my MacBook Pro, and it seems to know how to work with both of them, but it seems like it lets you sync one folder on your computer with a "Photo Library" on the phone, or requires you use an Apple endorsed photo management album.

When you do, however, check out the many options you have for selecting what goes on the phone (note that we're on the "Photos" tab in iTunes after having selected our plugged-in iPhone):

It's a bit small here, but basically you can choose between named albums, smart albums, events, and albums based on the facial recognition software in iPhoto/Aperture. I have "All Videos" and photos that have all three of my children tagged in them ("All Three Kids"). But that's not all. Let's look a bit more closely at the top segment of this area in iTunes on my Mac:

You can include all albums but if you're like me, that'd crush that little iPhone, even with full memory. I really do have a LOT of photographs! :-) Doting parent, I suppose. :-)

Instead, I have "Selected albums, events and faces and automatically include..." which gives you lots of really cool options, as you can see in this zoom:

You can tweak, resync your phone, and check the fill bar in iTunes to see how much space all of your photos are taking up. I have it set to sync the three most recent events and that way I always have fun new pics on my phone, even when I'm not really paying much attention to it.

Oh, and in iPhoto (or Aperture), make sure you are good about splitting things into separate events by date, location, or manually. My iPhoto window has over a hundred events, here's a small sampling:

You can see how that ties in to the display in iTunes, earlier. Very slick.

Better yet, here's what you'll see on your iPhone when you have it all set up:

And that is how you get multiple albums on your Apple iPhone 3GS (and any other iPhone or iPod Touch, of course).