The reason that you cannot use the camera connected directly to the computer (and why it has Win98 as the minimum requirement) is because Windows 95 does not natively support USB in any capacity whatsoever. Some USB items can be installed with drivers that emulate (technically they encapsulate) USB capability on Win95, but it is a cheap workaround by some vendors at best (and later by Microsoft in a patch), primarily for those who refused to upgrade to Win98 and complained that USB items would not work correctly and for the most part, at all. The fact of the matter is that less than 5% of all USB1.1 compliant devices will work on Win95 with any large capacity and none of those will work to their full potential. USB simply was not around when Win95 was coded and it wasn't fully considered as viable until Win98 began development.
The very best workaround for a digital camera, specifically, would be a serial/parallel port based card reader. Either that or an upgrade to Win98 or better.
Win98 was the first Microsoft OS to fully support USB1.0 compliant devices, though they still had to have drivers installed to support all features of the device. Win2000 and XP natively supports the USB1.1 and 2.0 standards, which allows devices to have generic capabilities natively supported by the OS for virtually any device. For example, most cameras simply register as an external hard drive and Windows will treat it as such. It doesn't need to know that it is a camera, simply that it contains a storage device as per the USB standard. This gives the illusion that WinXP and whatnot supports nearly any device when, in fact, it simply supports certain types of devices, like communication, storage, and so on.