Internal just means the processor has the active oscillator circuitry onboard. In most cases (including all the 65-family cases I'm aware of), you still need some external parts, but the clock-generation design job is made easier. See the recent discussion on clocks. If the part offers an internal clock circuit, you can still use an external oscillator if you wish, but you just have more options.
In order to not only save parts but also leave as many pins available for I/O as possible, some small microcontrollers have the whole thing onboard. You don't even need a crystal or any other time base if you don't want it. The internal time base will not be as accurate as a crystal, but if it's ok to be a few percent off for a given project, you can get up to six I/O pins on an 8-pin microcontroller. Only power and ground are extra.
In the case of the 65c02, you can use just a resistor and capacitor for time base if exact speed is not critical. 68pF from phase 0 to phase 2 and 5.6K from phase 0 to phase 1 will give you about 1MHz. I haven't tried it at the higher speeds of say 4-20MHz to know if it's dependable up there.
If you want to hang a crystal on the 65c02 itself, put it from phase 0 to phase 1, and put a 180K resistor across it. Then put a 47pF capacitor from each of these two pins to ground. Keep leads as short as possible. This particular scheme of putting a crystal directly on the 65c02 is from the datasheets and is again only recommended for the lower speeds. I have not personally tried this last particular method.
Garth
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