We will be in London for 5 days. I am under the impression that the Oyster card is the way to go. What it unclear to me is how they work. Do you essentially deposit money onto the card and then the appropriate fare is deducted each time you use the tube/bus? If so, can you add additional funds if necessary and what happens to any unused balance when you're done.
You buy the Oyster and put a minimum amount on it at a ticket window or elsewhere. When you exit the system there is a small monitor that tells you how much value is left on the card. You can "top it up" when you need to. When you go home the value remains on the card and you can use it next time you visit London. If you wish, you can turn it in and get a refund. To use the card you pass it over a reader on entering the Tube, then pass it over another reader when you leave. This is just a brief overview as I remember from last fall. For the real info go to www.tfl.gov.uk. The Oyster Card has been discussed before on this page; you could go the search box in the upper right of this page.
There is also the option of getting a "seven-day" Oyster Card which has unlimited usage for seven days. They cost around 24 GBP each - but if you are using public transportation a lot, they are worth it - and you may spend less doing that than putting money on a renewable card. If you look in Rick Steves' London or Britain guide, he has the math all laid out for you, and he suggests getting the seven day card (which only covers zones 1 & 2 -which is ALL the major tourists destinations) for five or more days.
We set our Oyster Cards up to automatically top-up when the balance was low, so we didn't have to worry about the balance. We then got a refund and the £3 Oyster Card fee returned when we turned our cards in at the end of our trip. I think the minimum top-up amount though is £20, so a travel card might be the better way to go for a 5 day trip.
Given that your options for Travel Cards are One-Day and Three-Day, and given that a Three-Day card costs 16.40GBP and a One-Day "off-peak" card costs 5.10GBP, your five day total would be 26.60GBP. Given that the Seven-Day Oyster Card costs 23.20GBP, the Travel Cards ARE NOT the way to go. They only make sense if you are in London for the "weekend" as that is what they are designed for.
You only want to get the "renewable" card if you are not traveling on Public Transport 1 or 2 of the five days you are in town (for example if you are taking a day trip out of town). But if you are using the public transport system regularly for five day in a row, the Seven-Day unlimited travel card is the way to go. Just keep in mind it only covers Zones 1 & 2 - but again, ALL the major sites are in those zones. If, for some reason you wanted to see 1 thing outside those zones, it is still cheaper to get the seven-day card and then pay for the one trip out of the zones.