First we need to define what types of digital cameras are available on the market. You basically have two options. You can get yourself a P&S camera or a DSLR.

If you are wondering what this initials mean, don't worry. I will explain it in a moment.

P&S stands for point-and-shoot camera, also called a compact camera. This is probably the camera you are most familiar with. It's a camera that was designed primarily for simple usage. Most point-and-shoot cameras use autofocus lenses for focusing and automatic systems for setting the exposure. Point-and-shoot cameras have flash units already built in.
This type of camera is particularly popular with people who want an easy to use camera for taking pictures on vacation or want to document a party or a birthday.

DSLR stands for Digital Single-Lens Reflex camera. We won't go into details how it works. For the purposes of this article I’ll define DSLR as camera that uses removable lenses. It uses a mirror that allows you to see the image you’re about to shoot through the viewfinder.

DSLR cameras are bigger and heavier than point-and-shoot cameras. The pictures you get with this type of camera are usually better. It also offers much more flexibility. If you want to get more seriously involved with photography you should really consider this type of camera. The prices of D-SLR cameras have dropped significantly and you can now get a nice “prosumer” model for less than $1,000.

To help you decide what type of camera you should buy, I have made a simple comparison between point-and-shoot cameras and DSLRs in this article.