DH used to sell (high quality) CCTV etc. He says it is possible it could be pointed into your bedroom! It is likely it is being used to watch the outside of the house for security purposes though.
As far as he can tell from the picture it is a small dome camera (he installed similar at his current workplace recently) and the camera inside is fixed in place, it can only be rotated if someone goes into the casing and moves it. It can not be rotated using a remote control, so if it is facing away from your window your neighbour can't rotate it from inside his house to see you. (The CCTV you see on television that rotates etc. are bigger units and generally cost 300 times more than a £50 Maplins jobby. The ones DH used to sell were about 700 times the price of the Maplins jobbies!)
You are not allowed to deliberately angle a camera into someone else's garden either, you are only allowed to gets bits at the edges of your picture where you can't just suddenly stop looking at the edge of your own boundary. The main focus can not be someone else's garden, it has to be your property or public spaces.
DH has concerns with your NDNs camera. It all depends on the angle of the lens and which direction the camera is pointing. As long as it is pointing away from your house and garden and it has a suitable angled lens it is fine, if not then you will want to do something about it. He also has concerns about it being on the 'side' wall rather than it facing outwards, the positioning doesn't make sense if you want as wide a view as possible of the exterior of your house.
I would recommend finding out from your neighbour what they can see. If it is a dummy camera\pointed at a bird's nest\looking away from your property that is fine. If it is pointing into your garden\house it is illegal. You have a legal right to know if that camera is pointing into your property, if it is it is a breech of privacy.
If you are not happy with where the camera is pointing or your NDN doesn't show you evidence of where it is pointing you can go to your council (not sure which department, probably environmental health), there might be a representative of the local crime reduction partnership working with the council also. If they don't sort it you can also contact your local police station, they will be able to help.
Sorry this is so long, wanted to give as much info as possible.