Why does the Camera button still appear when a Passcode is enabled?

This feature enables you to still take photos when your iPad is locked, saving time when you need to take a quick snap. It’s also possible to browse the images taken while the device is locked. However, other images stored on the device remain locked.

Can someone still erase my phone if it’s locked?

Yes. iTunes enables you to erase and restore any device that is Passcode locked. But be assured that they will never be able to access your personal data or settings.