The days of consumers owning film cameras are quickly fading into the past, and digital is becoming the defacto standard for both consumers and professionals alike. Sure, film will always have its place for certain things, but for the average and enthusiast consumer alike, film is dead.
Whether you're moving to your second or third digital camera, or you're looking to pick up your very first, odds are you and the person next to you are looking for the same thing... a quality picture. Who wants to bother taking pictures of those special moments with a camera that won't give you a clear, printable photo?
There are literally hundreds of different digital cameras available, and for the most part, most will take a reasonably good picture. However, there are two distinct classes of digital cameras, "Point & Shoot (P/S for short)" and "Digital Single Lens Reflex (DSLR)", and not only will choosing one over the other determine how good your pictures can turn out, but can also change the very basics of how you use the camera.
Yog-Sothoth has done a marvelous job of explaining the basic differences between P/S and DSLR digital cameras, what each is capable of, and when you may want to consider one over the other. Remember, there's never a right answer as to which is best, and every decision is not without sacrifice; convenience over quality, features over price, etc. If you want to get the perfect camera, try not to decide which type is best in general. Instead, examine your own needs, desires, and skills to determine which is best for you.
-Matt Whitlock - Editor, TechLore.com
POINT-AND-SHOOT (P/S) DIGITAL CAMERA
ADVANTAGES
Price: A good P/S with a myriad of features can be purchased for less than $200. The P/S digital cameras usually have a wide optical zoom range with minimal extra cost. Most use standard AA batteries, which are cheap can be found almost anywhere.
Convenience and ease of use: Some are smaller than a pack of cigarettes, so they easily fit into a shirt pocket. It’s usually only a matter of turning them on to get them ready to take pictures; I don’t believe I actually ever read the manual for mine before I started taking pictures with it. Those “candid camera” shots can easily be taken with a P/S camera, as very little preparation is usually needed. Since most of them use the JPEG format, very little must be done after shooting to prepare the pictures for web viewing, and a memory card can hold hundreds of JPEG images, depending on the size of the card.
Maintenance: Very little is needed to maintain a P/S camera. The only cleaning that a P/S requires is the exterior of the lens, and is usually only necessary if there are smudges on the lens. Simple dust will usually not appear in an image.
DISADVANTAGES
Viewfinder: Some low-end P/S cameras only provide a fixed viewfinder, so the user has no idea how the picture will look until after he actually takes it. More expensive P/S cameras, however, may show a “real-time” view of the image in the LCD as the picture is being taken. This has led to the so-called “digital stance,” where someone holds the camera over a foot away from himself to “frame” the subject.
Flexibility: P/S camera lenses are permanent fixtures on the camera, so the user is limited in what he can do. Some P/S cameras offer accessory lenses and/or filters that can be attached to the main lens, but these are usually proprietary and only work with that particular model camera. Most P/S cameras only have the option of the built-in flash, which tends to be very limited in range.
Quality: While P/S cameras can take excellent pictures, their image quality is usually overshadowed by the DSLR, even with the same rated number of megapixels. Most P/S digital cameras use the JPEG format, which is, by nature, a compressed format, so the best image quality possible cannot be attained.
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DIGITAL SINGLE-LENS REFLEX (DSLR) CAMERA
ADVANTAGES
Image Quality: DSLRs have larger sensors than P/S cameras, so image quality is better with a DSLR at the same rated number of megapixels. Though DSLRs include the JPEG format, mainly for convenience, they also offer the “raw” format, which is essentially unprocessed data directly from the camera sensor, and it is in no way compressed. Though more work is usually necessary after the picture is taken, the end result usually far superior. For instance, if the auto white balance feature failed, it can easily be corrected in the raw file, as can the exposure, brightness, and contrast. Of course, it’s always best to make sure things are set properly before the shutter button is pressed.
Through-the-Lens Shooting: Just like a 35mm SLR film camera, the user sees exactly what the lens sees, whether an extreme telephoto shot or a close-up shot. Of course, one can also see if he forgot and left the lens cap on. 
Flexibility: Many aspects of the camera can be changed. Different lenses can be used for different subjects and/or venues. For the ultimate in image quality, a “prime” lens with a fixed focal length is generally used. For close-up shots, a lens with macro capability is used. For extreme telephoto shots, a lens with a focal length exceeding 1000mm can be used. For wide-angle shots, lenses of 28mm or less can be used, which is especially useful for landscape photography.
All DSLR cameras include the option of manual focusing. Though auto focus works in most situations, in very low light conditions, manually focusing is generally more reliable.
Though DSLRs include automatic settings, almost any aspect can be set manually by the user, such as the aperture (“aperture priority”), exposure time (“shutter priority”), and color temperature (“white balance”). In manual mode, all settings are set by the user. For long exposures, a remote shutter cable can be attached to the camera to hold the shutter open indefinitely (in “bulb” mode). Bulb mode is especially useful for astrophotography; some excellent examples can be found here.
Compatibility: Digital SLRs generally use the same lenses as their 35mm film camera counterparts. As a matter of fact, some manufacturers, such as Pentax, allow for the use of lenses that are decades old. I have a 300mm “prime” lens that was made in the 1970s, and it works well with my Pentax DSLR.
Different types of filters can be used to enhance pictures or to create effects. Though filters come in different sizes, they can be attached to any SLR lens with the specified diameter. I have 49, 52, and 58mm filters, as those are the numbers on my various lenses. Polarizing filters can be used to reduce glare and take shots through glass or through water, and they can help increase contrast with landscape shots. Ultraviolet filters can be used to remove the bluish caste that can appear with outdoor shots. Star filters can be used to give light sources a “starlike” appearance. “Close-up” filters can be used in lieu of a macro lens for close-up photography, such as pictures of insects. An in-depth list of filters and their uses can be found here.
Flashes: While DSLR cameras include a built-in flash, the best pictures are usually taken using an add-on external flash, which is usually attached to the hot shoe mount atop the camera, though it can usually be used off-camera with an additional cable and bracket. External flashes offer much greater range than built-in flashes, and better ones include “bounce” and “swivel” heads, which can be used to reflect the flash’s light off ceilings and/or walls, which can prevent much of the washed-out look that can be observed in photos taken with the flash pointed directly at the subject.
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DISADVANTAGES
Cost: Though prices of excellent DSLRs have decreased substantially, one can still expect to pay at least three times as much for one. If the user already has lenses he wants to use, however, the cost can be slightly offset by purchasing only the camera body. Many DSLR cameras also use special proprietary battery packs, which cost many times more than rechargeable AA batteries.
Convenience: Unless one is the size of the Jolly Green Giant, a DSLR will definitely not fit into a shirt pocket. Most people who use DSLR cameras, including myself, carry around large bags full of lenses, flashes, and accessories (I also have a dedicated filter case). It would be rather difficult to take those “candid camera” shots with a DSLR, as a DSLR can be spotted from quite a distance.
Though DSLR cameras can shoot in the JPEG format, many users will choose to shoot using the raw format. While the best pictures can be taken this way, far fewer exposures can fit on the same memory card than could using the JPEG format. For this reason, most users of DSLRs usually carry multiple memory cards (I have a special case just for my memory cards).
Concerning batteries, if the DSLR uses a proprietary pack, this can be a definite issue in an emergency. A DSLR with a discharged battery pack becomes an expensive paperweight. Note that my Pentax *ist DL (don’t ask me how to pronounce that) uses rechargeable AA batteries. Though rechargeable nickel-metal hydride batteries are best for my camera, I can use alkaline batteries in an emergency, and alkaline AA batteries can be found at any convenience store.
More preparation is usually needed to take pictures with a DSLR, even when using automatic settings. Part of that may be due to the fact that users of DSLR cameras desire the ultimate in picture quality, so they generally spend more time preparing the photo session. More work after photo sessions is also usually required, especially since raw camera files can only be viewed/manipulated using special software.
Maintenance: Not only do the lenses for DSLR cameras require the front of the lenses cleaned (though usually only if smudged), but they also require the rear of the lens be kept clean. In addition, dust can make its way onto the camera sensor itself, which can easily be seen on exposures, and some people pay to have this done rather than risk damaging the sensor through improper cleaning methods. In my experience, however, a large “rocket blower” is usually all that is needed to clean a sensor.
From the above, one could presume that I would recommend the DSLR over the P/S. Actually, for most users, I would recommend they stick with the P/S, unless they are serious about photography and are willing to devote the time and money necessary for the hobby. My ultimate recommendation would be for someone to have both types of cameras, so the P/S could be used in situations where the DSLR would be inconvenient or impractical.
In closing, I should note that there is another type of digital camera that is growing in popularity: the “prosumer” camera. The prosumer combines elements of both the P/S and DSLR cameras. Though not as small as the P/S type, it is still not as bulky as a DSLR. Like a P/S, its lens is not removable, but it can usually be fitted with standard filters. And just a like a DSLR, it can usually shoot in the raw camera format, so the picture quality can rival that of the DSLR.
