I'm presently writing an essay titled "Short and Flawed Guide to Photography" as a pet project, with the aim to debunk a few myths and explain the basic principles. I'm not planning on publishing it anywhere, but it is a way for me to spend time thinking about the essentials.
One of the recurring themes in this guide is: when it comes to the physics of image quality, bigger is better.
Any camera has basically three key components...
1. Light-tight box. Doesn’t care about size.
2. Light-recording device. Larger sensors/film are more sensitive, record finer detail and better reproduce color.
3. Light-gathering device. Larger lenses gather more light, transfer more detail and more contrast. Larger lenses also have more artistic character in their rendition, in some cases a whole lot more.
How small is too small?
Human nature pretty much guarantees that the size limit where photographic utility starts to break down is exactly that of a compact Point & Shoot camera. Undiscerning masses keep demanding ever-smaller wundergizmos and the huge market pressures that result force the leading camera manufacturers to sacrifice quality at the altar of size. There’s little good to say about P&S cameras, so if quality is anywhere near the top of your priorities, try to find a way to avoid them. Avoid them, plague-like.
What sort of size difference are we talking about?
The average P&S sensor is 6mm wide by 4mm high, while the average SLR sensor is 24mm by 16mm. Some high-end DSLRs and all film SLRs use 35mm cells : 35mm by 24mm.
A 36x larger sensor area collects 36x more photons with every exposure. Photons are the currency of photography - tradable for fine detail, sensitivity and contrast. The downside? Larger cameras are heavier, need larger/heavier lenses, and the whole thing always costs more.
How big should your camera be?
Your camera system should be as large as you can live with and afford with reason. No smaller and no bigger. Size can be mitigated somewhat by buying a good camera bag or selecting compact accessories, but the best camera is always the one you carry and use.