In my books, there are a two general types of locks:
Keyed Lock: can be locked and unlocked from the outside with a key, or the inside without a key. (This would include deadbolts)
Privacy Lock: Can only be locked and unlocked from the inside. These usually have a standardized 'key' to unlock them through a small hole, in case of emergency. They aren't designed to keep anyone secure - only prevent someone from entering accidentally while occupied. Like a bathroom, or bedroom.
I use Privacy Locks.
I had a guest request that I add Keyed locks. I declined that request, explaining that keyed locks give the false impression that the rooms can be used to store valuables. (If they have valuables, it is their responsibility to secure them, not mine.) Also, if they lose their key, how will you recover the room? Thus a spare key would be essential. But knowing that I would have a spare key, the guest gains no added security over the privacy lock.
(An exception to this rule is if you have multiple rooms/guests... then you may benefit from giving each a key to their own room, but they should also understand that you also have copies of those keys. So other guests can't access their room, but you can.)
Oh, and the 'Lock on Door' feature that you're referring to -- I also would assume that it means a keyed lock or privacy lock. Both are, indeed locks.
But the lock only locked from the OUTSIDE? Was there a manual locking mechanism inside the room, and a key outside?