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Canon is crazy all right — like a fox. Let me explain.
First, the sensor resolution. Almost 15 megapixels may sound impressive, but packing that many photoreceptors onto a small sensor creates a lot of unwanted image noise, especially at higher ISOs. As a result, the G10 exhibits phenomenal image quality at ISO 80 and 100, but middling quality at 200 and rather poor quality at 400 and higher. So if you want to use the camera in low-light conditions, your options are limited.
Reducing the pixel count from 14.7 million to 10 million should address this problem and help the new G11 produce clean, relatively noise-free images at ISO 400 and possibly higher. Admittedly, a 10 megapixel sensor doesn't offer the same resolution as a 14.7 megapixel sensor, but the differences are smaller than you would expect. In fact, I've used the G10 at its 5 megapixel setting and was still impressed by the image detail — you can blame the (excellent) lens for that.
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In fact, tilt-and-swivel LCDs were a hallmark of the Canon G series until the G7 model, when Canon — much to the dismay of G-series enthusiasts — decided to go with a static LCD. Canon was criticized for this move, and rightfully so. It has also been criticized for equipping the G10 with such a high-resolution image sensor when a slightly lower-res sensor would produce cleaner images at high ISOs and in lower light.
All of which makes the G11 so important. Because it signals that Canon is willing to listen to its critics and do the right thing.
Just one question: Will those same critics — and the market at large — also do the right thing and embrace a high-end compact camera that dares to drop out of the megapixel wars in the pursuit of a better photographic experience? I certainly hope so, because I think Canon deserves to be rewarded for this move.
The problem is, I bet a lot of people will dismiss the G11 because it doesn't boast the 12, 13, or 14 megapixels of other, cheaper compacts. And that would be, well, crazy.