This is Albert, the Zen master:
I bought myself Panasonic Lumix GF1 camera (with small pancake lens) which - at least to me - is a breakthrough piece of hardware. It shoots almost as well as DSLR, however it's very compact (slightly larger than Canon Powershot G series including the lens). That means I can carry it with me fairly easily in the belt pouch wherever I go and use it for guerrilla-style photography (i.e. "shoot lots of trash, pick 5% of interesting stuff from it"). I just have to find the right pouch, the current one is too big.
GF1 is fairly expensive but the quality of images is noticeably better than the best digital compacts (I had Canon Powershot G10 until now). For example the above photo is very small crop from large image, basically pixel-per-pixel resolution. And that's not even RAW, just plain old JPEG on full automatic. The level of detail is excellent and exposures are much shorter meaning there is less blur.