
Usually i prefer to work with digital slrs, because of the low noise and the good DOF (= small). In spite of the technical predominance of dslr-systems there are some situations, when a compact camera is better: When you do not want to carry too much weight with you, when you need a discrete cam or when you do not want to use too expensive gear.
Modern compact cameras have reached a good noise level in the meantime - i especially like the Canon G-series. They have a popup Liveview, which is great for using spectacular perspectives. And the image quality is really astonishing. I once started in 2002 with a Canon G2 with my serious digital photography and still like the new G11, though i probable will not buy a new compact camera any more. I feel fine with my old G2 - it is a bit nostalgic for me, to go out and shoot with the G2 or the G6.
This shot here was also made with the G6 in 2005 - the users of the german Fotocommunity gave a so called gallery star to this image and i must say, i still like this image and my post processing work. My original title was "Aus Grimms Märchenwelt", which is translated "From Grimm's Fairytales" - and it is really a beautiful magical place, where i made this image.
For sidewalks and sujet-based compositions a good compact cam is in many cases good enough, at least if you have enough light. Because of the light weight there is bit a bigger danger of camera shake and you may get relatively easy an uneven horizon. But on the other hand it is a good feeling, to carry a feather weight cam instead of a big and heavy camera bag. So it can be freedom, to shoot with a compact cam, especially in the city, when big cams are not discrete enough for shooting people.
My dear friend Rui Palha loved in the past years his Olympus Camedia 5050 very much, though he uses in the meantime other cameras more often. But the results of the "Oly" were absolutely amazing, Rui loves the feeling of this cam - and many other street photographers are preferring compact cameras for their work. It is obviously the small size, that counts for street photographers.
Ricoh has a new gx-series with modules and its image quality is very close to a dslr.
A good compact cam can produce absolutely great results in the hand of a good photographer - and the good news is: There is no need to invest a fortune in a Leica M9! :-) Of course such a camera is on a marvellous technical level, but the right location, the right light of the sujet or the decisive moment is NOT built in - not even in a Leica. ;-) And this is, what's decisive for a good shot: Not the pure technical quality, but the composition and what's shown on the picture.
The easy use and the discrete look of a Leica M-cam once were the main reasons for many famous photographers, to use this cam. In the meantime ordinary compact cams are offering the same (and more) features for less money. There is - of course - a special magic in the feeling of a Leica M cam, and this is maybe inspiring the photographer. But i am convinced, that you can shoot amazing shots with a compact camera like the G11, good enough for prints even in magazines.