Panasonic Lumix GF1

Tuck the GF1 into your pocket like a point-and-shoot, but switch its lenses to suit your shot just as you would with a pro-style SLR. At 1.4 inches thick, it’s the smallest camera with swappable lenses and a built-in flash. It follows a new standard for lenses and cameras, called Micro Four Thirds, that allows for ultra-thin bodies by eliminating a traditional optical viewfinder and the bulky light-directing mirrors that go with it. This hybrid shooter can even act as a camcorder that continuously autofocuses—a rarity in changeable-lens cameras—when you add a quiet (albeit pricey) lens.
$900; panasonic.com