PrashantP wrote:
I read the other day that the individual pixels in a RAW image only
contain information for 1 color each. When an image is converted
(either in camera or on the PC) information from nearby pixels is used
to interpolate for the other colors.

Correct.

I know that my viewing/editing application uses the manufacturer
supplied .dll for decoding the image - question is does it convert it
before displaying it on the screen. In other words, in order to
display RAW images, is there some form of conversion taking place
before the result is displayed on the screen?

Mostr certainly.

And if yes, then do they use some "default" settings for this
conversion?

Either the camera will provide default settings or the RAW conversion
will provide some. For converting to JPEG the software should provide
options at least for exposure and color balance.

--
Ray Fischer