Water system - can you explain in simple terms

We bought our 2000 Abbey Spectrum caravan from a private seller and although we have a handbook, it doesn't really explain how the water system works.

This is what I do; I fill the Aquaroll at the tap and hook it up to my caravan with a Whale pump.  Inside the caravan is a switch that says "tank fill".  When I switch this to the ON position it fills up the internal water tank.  When the tank is full it will start to pour out of the bottom of the caravan or if the Aquaroll is empty the Whale pump will start to scream and I turn the tank fill switch off quickly.  All's well so far.

However, what puzzles me is the water heater.  We have a little switch under the settee that says WATER HEATER.  When this is switched on there is a little red light and I assume it is like an immersion heater.  It takes about half an hour before we can get any hot water through the taps.  But what supply is being heated?  It can't be all the water in the main water tank otherwise we wouldn't be able to get cold water simultaneously so there must be a seperate tank that holds water to be heated.  I get this but how does that tank get filled?  And, once the hot water has been used how does it get filled again?  

I really do struggle to get my head around how this works so if anyone can share the benefit of their wisdom with me I would be eternally grateful.