(FORTUNE Magazine) – Early adopters of digital cameras often became surly adopters. That's because the first models were expensive and rarely performed as well as those $10 disposable cameras sold in drugstores. But in the past year the picture has gotten much brighter. Digital cameras are getting better and cheaper. A new wave of three-megapixel cameras, capable of delivering eight-by-ten photo prints so good that they're hard to distinguish from film-camera prints, have come to market for less than $1,000--often much less.

That's still a lot of money to spend on a camera, to be sure. But the savings on film processing, along with point-and-shoot ease of use and the many advantages of digital photography, make the newcomers more attractive than ever for snapshooters and serious amateurs alike. I've found a handful worthy of consideration; post-holiday sales may make them even more of a bargain.

What's so important about three megapixels? Relying on pixel count as a guide to photo quality is risky, just as relying on megahertz is not necessarily the best way to judge the performance of a personal computer. Some two-megapixel (2MP) cameras rival the more expensive 3MP models in image quality for standard-sized prints. Here's the big difference: The more pixels the camera can capture, the bigger the prints you'll be able to make. A 2MP camera usually can't create an image sharp enough to yield a decent eight-by-ten print.

Even photographers who never need to make a print larger than four-by-six or five-by-seven may find the new 3MP cameras attractive, however, for two reasons. First, the higher resolution of the 3MP camera allows you to crop a picture more easily. You can cut out unwanted parts of the photo, like Uncle Harry mooning the camera in a group shot, and still have enough information left over to make a big print. Second, the higher-end models typically have more sophisticated features, such as zoom lenses, voice annotation, and video recording.

All the 3MP cameras mentioned here produce pictures that, when printed on photo-quality paper and a good inkjet printer, will rival the prints from your drugstore's photo-processing lab. But with a digital camera, there's no film: You don't have to wait for processing, you can toss lousy shots on the spot, and you can edit them easily on a PC. And you can e-mail the photos almost as soon as you snap them. When my friends Lee and Jennifer had a baby recently, Internet-connected friends and relatives were admiring the first pictures of little Gabriella in a few hours.

That brings us to a drawback of these high-resolution cameras. The more megapixels you capture, the bigger the digital files you create. The bigger the files, the more storage capacity you need, both in the camera and in your PC. Storage is pretty cheap on a PC, but those little solid-state memory cards used by most digital cameras are expensive. And sending an uncompressed digital photo via e-mail can be considered a hostile act if the recipient is using a slow dial-up modem.

Let's go to the shooting gallery. I still haven't found a 3MP digital camera that clicks as well as Nikon's CoolPix 990, a $1,000 gem that has been around for a year. But its little sibling, the Nikon CoolPix 880 (about $650), packs almost all of the 990's features and quality into a more conventional camera, without the 990's clever but unusual swiveling lens. The 880 offers something for every level of photographer, from point-and-click auto mode to sophisticated manual controls for focusing and exposure. Nikon is famous for its high-quality lenses, and the all-glass Nikkor lens on the CoolPix 880 is second to none. The 880 uses either rechargeable batteries or disposable lithium batteries, which you can find in most camera stores. Digital cameras are battery pigs, so that's a virtue not to be overlooked.

Then there's the Kodak DC4800 Zoom (about $750), which deserves praise as much for its ease of use as for its sharp 3MP picture quality. The DC4800 has a 3X optical zoom lens, roughly the equivalent of a 28mm to 84mm lens on a conventional camera. Zoom lenses are good. They give the photographer much more flexibility when composing a shot. But you should know that so-called digital zoom, offered by almost every digital camera with a zoom lens, is of only marginal value. Optical zoom brings the image into closer view; digital zoom just artificially inflates the size of the pixels. You can get the same effect by zooming in on the image once it's in your PC's photo-editing software.

Want your pictures to move? The Toshiba PDR-M70 (about $700) is among the first of a new breed of digital cameras that can also capture short videoclips with sound, though the clips are brutish and short compared with those you get from a decent camcorder--two minutes is about the limit. The Toshiba also allows voice annotation of digital photos, which is surprisingly handy. Rather than jotting notes to help you remember details of different shots, you can attach voice tags to the shots themselves. Picture quality is excellent too--as is the price. Some Internet retailers are selling the PDR-M70 for as little as $599, within shooting distance of the magic $499 price point where many gadget hounds feel they don't have to ask for spousal approval before buying. Jon Pepper, editor of Digital Focus, an independent newsletter that covers the digital-imaging industry, says that the arrival of new 4MP cameras this year will further drive down the cost of current 3MP and 2MP cameras, creating some great values. We can see 3MP cameras dipping below $500 by year-end.

Accordingly, we'll wait for better pricing on the 3MP Ricoh RDC-7 (about $730). It's a truly innovative model that delivers good pictures, plus video and sound. The RDC-7's chief strengths are sleek styling and a pop-up LCD screen, better than most for viewing pictures before and after you snap them. (A word on LCD screens: Most appear washed out in bright sunlight. When shopping for a digital camera, ask to take it outside.) The RDC-7 also touts a "pro mode" that promises resolutions as high as 7MP by taking two pictures and combining them. On a practical level, though, the pro mode is of limited value--it's primarily for studio shots on a tripod--and slows the camera down considerably.

Epson, which makes superb photo-quality inkjet printers, also makes an interesting digital camera in the Epson PhotoPC 3000Z (about $875). Many people tell me they love this camera. It has a full array of features, and the image quality is among the best in its class. But nothing about it wowed me. Which proves that the choice of a digital camera is ultimately a personal decision that can rest on intangibles like the way it feels in the hand. Always test several different models in the same resolution and price class.

Speaking of price, what if you want a cheaper model for snapping quick pictures to send by e-mail, post on a Website, or publish on plain paper in next year's holiday letter? For such things, even a 1MP camera can be a good choice. My favorite is the Umax AstraCam 1800 (about $200), a shirt-pocket-sized, point-and-shoot model. The controls are uncomplicated, the picture quality is just fine for prints up to four-by-six or so, and it operates on standard AA batteries. It's a dandy choice for someone who is interested in digital photography but not quite ready for a fancier camera. Until the prices come down, that is.

FEEDBACK: plewis@fortunemail.com

INSIDE: A SATELLITE PHONE THAT HANDLES DATA TOO | ZIPPY NEW MP3 PLAYERS