People often ask for advice on choosing a new camera. That's not easy advice to give. Much depends on the intended use of the camera (OK, for many readers here that would be taking interior and exterior photos of homes), and even more depends on a user's personal preferences, the "brain-fit" of the controls, the camera's fit and feel in your hands.
And since some folks here just might be new to digital photography, I thought it might be a good idea to take a quick look at the differences between the three major types of digital cameras.
Pocket-Size Point-and-Shoot
These cameras are small, easy to carry, and will take decent shots with a minimum of effort. Disadvantages: Many models do not have a optical eyepiece; you must compose your shot by looking at the LCD monitor, which is OK until you are in a bright light situation and unable to see the LCD because it is washed out by glaring sunlight. Many P&S pocket-cams do not have manual controls, but do offer a variety of image "modes". The Kodak models V705 and V570 fit in this category.
No matter what you use for your serious shooting, I think it is a good idea to always have a little P&S camera in your purse or pocket. There may be times when a large camera seems intrusive and inappropriate (a social gathering, maybe), or other times when your large camera is simply not with you. Yes, a cell phone camera would do the trick in those situations, too.
Full Size D-SLR
The acronym SLR stands for Single Lens Reflex: a unique mechanical system, first developed in the 1880s, that allows the photographer to 
see in real time - in the camera's optical eyepiece - exactly what is captured by lens -- whether zoomed way out, or focused in extreme close-up. It is done by reflecting the image off a small mirror behind the shutter, then through a pentaprism in the dome of the eyepiece, to your eye.
That's why, when taking a photo with your SLR type camera (film or digital) the image in the eyepiece goes black for an instant when you snap the shutter: The mirror snaps up at that instant and blocks the reflection through the eyepiece.
The lens of a DSLR in interchangeable, it can be removed, allowing the photographer to quickly switch from an ultra-wide angle lens, to a supertelephoto or specialty macro. And most enthusiasts soon amass a collection of lenses.
The lens mount system varies with each camera manufacturer, making a photographer's switch from one manufacturer to another a fairly big decision. For example, if you have a collection of Nikon-mount lenses, they are not usable with Canon camera bodies; so unless you plan to buy new lenses, when you buy a new DSLR camera, you will probably buy another Nikon.
DSLR Advantages: You can choose to go "Full-Auto" or you can take over with manual controls. Almost limitless creative options with interchangeable lenses, accessory flashes, and other accessories. Highest image quality. Disadvantages: Large size, cost.
Fixed-Lens Compact Zoom
These hybrids can offer a interesting compromise: Larger than the pocket-size P&S camera, but smaller and lighter than a full size DSLR. While the lens cannot be changed, some of these compacts offer an impressive range. Take a look at the new Olympus with its 27-486mm equivalent. Most models allow for the use of accessory flash. Most allow the photographer to choose "Full-Auto" or manual controls. Disadvantages: On the compacts that I own at any rate, the shutter lag is more noticeable than either the full size DSLRs or the pocket-cams.
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Keep in mind that there is not a single perfect camera, or camera-type for everyone. The right camera is the right one for you, based on your budget, your level of interest , your intended use.
It is always helpful to actually go into a camera shop and handle some cameras.
Does it feel right in your hands? Are the control knobs and buttons in logical easy-to-reach places for you? Or is there a awkwardly positioned button that you might accidentally push when reaching for something else?
Or - if you have large hands - maybe the grip seems a little too close to the lens -- like your fingers might get stuck inbetween?
Everyone's hands/fingers are a little different and a camera that feels just right to one person feels too big/too small to someone else.
(And if your local camera shop is helpful in letting you play around with their stock -- return the favor and buy something from them! Don't go into their shop, ask to hold this, ask to hold that, and then go buy it online :-( )
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