I'm of the mind that compact cameras are hitting a ceiling. They've hit a ceiling as far as resolution goes, with most of them, even the expensive ones, not going very far above 12MP. And all of the technological advancement in the world isn't going to overcome the limitations of a 1/1.6" sensor. I doubt that we'll see 4/3's sensors popping up in compact bodies, even though I think that would be ideal, but it seems a fait accompli that new generations of compact cameras will have to bump up the sensor size.
I raise this issue because of the clash between the two top compact cameras, the Canon S95 and Panasonic Lumix LX5. Both are rocking 1/1.6"(ish) sensors, both are around $500, and both produce near-identical images. Camera Labs has a comparison between the two and the Canon SD4000IS, which has a significantly smaller 1/2.3" sensor, and yet performs admirably against both of the more expensive cameras. It leaves one with the question, why even bother buying the more expensive compact cameras?
You could go to the top-tier 1/1.6" cameras, like the Canon G12 or Nikon P7000, but again, really? They're bulky and don't give you much of an image boost over the compacts with similar sensors. They've got slightly more pro-ish ergonomics, but who cares? I'm a huge advocate of Micro 4/3's and it's because of these issues that, except for the cheaper compacts, M4/3's has completely obviated the high-end compact market.
Obviously, the compact market will have its place. Even the smallest lens on the smallest m4/3's camera isn't completely pocketable, but if quality is at all important, the ceiling has been hit. Curiously, it's at this time that the compact, integrated lens market is seeing its biggest explosion at the high end. Nikon has just released the P7000, Canon has its upcoming G12, Panasonic has its excellent LX5, Olympus is even jumping in with a new entry. I don't get it! There are only so many people out there who want to spend $400 or more on a pocket camera.
I think that Fuji's (fucking gorgeous!) upcoming camera is likely the vanguard of the new compact camera high-end. Surprisingly, they've leapfrogged smaller sensors entirely and gone to a full, APS-C sensor, installed it inside one of the most gorgeous cases I've ever seen, and are, unsurprisingly, charging a vanguard price for it ($1000). I suspect that if it's successful, other companies won't be too far behind with their own options.
I'm disappointed in Olympus. Considering the amount of development that they've put into the 4/3's sensor, one would think that they'd be itching to slap that puppy into any form factor that they can think up. As for me, if you only want to take snapshots, buy a cheap P&S. The value equation just stops making sense when you move up to what's, essentially, the high-end of the low-end. What's the point?
I forgot to mention, and not to put too fine a point on it, but Photography Blog has a review of the Canon SX30 superzoom, which gives you 35mm focal length equivalents of 24mm up to 840mm. The only way they were able to manage that stupid 840mm was to use a miniscule 1/2.3" sensor, and as you would expect, the image quality isn't good. The images are unusably noisy at anything past ISO-400. In the race to sell new cameras every year, companies are going to be forced to increase sensor sizes. The Nokia N8 portends a future where cell phones are using sensors once restricted to point-&-shoots, which will effectively kill the compact camera market as it is.
Camera Labs has uploaded a review of the Panasonic LX5 and expresses opinions almost identical to mine in their conclusion.