Does my Android phone uses battery or outlet power to operate while being charged?
From my experience, my phone (HTC Desire) seems to use battery while being charged... or at least a combination of both. Reason is, while plugged in, if I am doing something intensive - eg playing games, I notice that either the battery % hasn't really increased or has actually decreased!

Also, not sure which phone you are using, so the behaviour maybe different to the Desire, but I'm guessing it uses a lithium-ion battery - here is some good info on "the best way to use Li-ion batteries" http://arstechnica.com/gadgets/news/2011/02/ask-ars-what-is-the-best-way-to-use-an-li-ion-battery.ars

Basically:


They don't have memory
Don't worry about overcharging
Don't completely deplete the battery - lowest ~20%
Use your battery - you need to 'exercise' the battery
Try to keep the battery cool