Before you rush off and spend $400 on the “super telephoto” Nikon Coolpix P500, like I almost did even though I already have a Nikon D3100, consider image quality is all about sensor size.
Main article: Image sensor format
Image sensors used in DSLRs come in a range of sizes. The very largest are the ones used in "medium format" cameras, typically via a "digital back" which can be used as an alternative to a film back. Because of the manufacturing costs of these large sensors the price of these cameras is typically over $20,000 as of December 2007.
With the exception of medium format DSLRs, the largest sensors are referred to as "full-frame" and are the same size as 35 mm film (135 film, image format 24×36 mm); these sensors are used in high-end DSLRs such as the Canon EOS-1Ds Mark III, the Canon EOS 5D Mark II, the Nikon D700, the Nikon D3, the Nikon D3X, the Sony Alpha 850 and the Sony Alpha 900.
Most modern DSLRs use a smaller sensor commonly referred to as APS-C sized, that is, approximately 22 mm × 15 mm, a little smaller than the size of an APS-C film frame, or about 40% of the area of a full-frame sensor. Other sensor sizes found in DSLRs include the Four Thirds System sensor at 26% of full frame, APS-H sensors (used, for example, in the Canon EOS-1D Mark III) at around 61% of full frame, and the Foveon X3 sensor at 33% of full frame.
The sensors used in current DSLRs are much larger than the sensors found in digicam-style cameras, most of which use sensors known as 1/2.5", whose area is only 3% of a full frame sensor. Even high-end digicams such as the Canon PowerShot G9/G10/G11 or the Nikon CoolPix P5000/P6000 use sensors that are approximately 5% and 4% of the area of a full frame sensor, respectively.
The current exceptions are the Micro Four Thirds system by Olympus and Panasonic, the Sigma DP1, which uses a Foveon X3 sensor, and the Leica X1. Leica offers an "S-System" DSLR with a 30×45mm array containing 37 million pixels.<9> This sensor is 56% larger than a full-frame sensor.
There is a connection between sensor size and image quality; in general, a larger sensor provides lower noise, higher sensitivity, and increased latitude and dynamic range. There is also a connection between sensor size and depth of field, with the larger sensor resulting in shallower depth of field at a given aperture.
#1. "RE: So you think you understand image quality" In response to Reply # 0
The quality of the lens, the manner in which the camera is held, and even the f-stop used can affect the quality of the image recorded. If the f-stop is small enough, it will create an 'Airy Disk' that will cause diffraction of the light being recoded by the sensor. Note that the f-stop at which this phenomenon occurs can also depend on the size of the recording media.