I found this great article that I wanted to share by Phil Pivnick on “How to Choose A Digital Camera”. I get asked this question a lot, so I hope this helps. Feedback is welcome!

With so much to choose from it seems impossible to decide on which camera to buy.  There are a lot of variables between models but these shouldn’t be allowed to cloud the selection process. For the average photographer, someone who needs the camera for everyday family snapshots and vacation photos, the best starting point is to decide what size camera is most comfortable.

This means that before worrying about mega-pixels and zoom lenses you should first decide between a tiny pocket camera or something bigger and, perhaps, easier to hold.  Both have their perks.  The pocket camera will be with you all the time as it takes up little room.  On the other hand, the bigger cameras often have greater zooms, stronger flashes and extra features.  As great as that sounds, the last thing you want is a camera that just sits around because you couldn’t be bothered to take such a cumbersome thing with you.

By this point you’ve actually managed to eliminate half the cameras available.  Now I recommend looking at the different optical zoom capabilities available.  The average zoom is 3X with some small cameras offering up to 5X and larger cameras offering up to 12X.  Is more zoom better?  To a certain degree, yes.  For someone who likes to take pictures of their children playing sports or animals in the wild, a larger zoom will likely pay off.  If “zooming in” is something you’ll rarely do, then find assurance in the fact that you can easily zoom into a digital picture after the fact no matter what type of lens you used.

There are still a lot of cameras out there to choose from but, by now, pricing things out will become easy.  What other differences should you look at?  For one thing, brand name.  I always recommend sticking with a brand that has a photographic history you trust.  Canon tends to be not only an innovator but also a market leader and they are joined at the top of the sales charts by Sony and Kodak.  Nikon, Fuji, Pentax, Olympus and Samsung are other—but not the only—good manufacturers to look at.

The difference in quality between their end results is slim, especially from the point of view of a home photographer.  Some use lenses that are technically superior, but the truth is that even a bad lens these days is still pretty good.  Kodak and HP tend to boast the easiest cameras to use with Canon and Sony backing their cameras up with tons of extra features.  Other cameras are waterproof, have larger screens and even allow you to connect to a computer wirelessly.  Choosing between these perks is a personal thing as it won’t affect your photo’s quality.

I leave mega-pixels until last for a reason.  Unless you plan on making poster sized prints, in which case you’d need a 6mp to 8mp, anything above 3mp will do a great job.  If you can afford a little more after getting the other features you want then splurge on a higher mega-pixel; once in a while it’ll pay off.  If not, don’t fret.  Your photos will still look wonderfully crisp.