Though ILCs may be the more interesting enthusiast cameras, the more popular market seems to be compact, fixed-lens models, such as the Canon PowerShot S95 and Nikon Coolpix P7000. Olympus forges into that market with its XZ-1, a promising-looking model that's not quite as compact as the S95, but with an exceptionally fast f1.8 lens and a sleek design that rivals models like the Panasonic Lumix DMC-LX5 in size and operation.
Its photo quality falls short of excellent, though. While the JPEG processing is a problem, it seems like the images don't come off the sensor clean enough to lay all the blame at the feet of the algorithm. I found that I could fix detail issues at low ISO sensitivities, but couldn't gain much latitude with respect to noise. Even at ISO 100 details like hair can come out mushy in JPEGs at midrange distances; this is a problem for landscapes, for example, where grass and leaves will look muddied. Processing raw can help somewhat at higher ISO sensitivities, but I was unable to produce an artifact-free version of an ISO 400 shot. At midrange ISO sensitivities you can get cleaner shots, but the trade-off is some lost detail.
In its default settings, Olympus applies a bit too much sharpening to the center subjects in its JPEGs. While it doesn't look too bad in many cases, in more natural shots it adds a bit of crunchiness. Overall, the camera renders reasonably accurate colors and they're pleasingly saturated. The camera's generally cool outdoor white balance shifts the hue in reds a bit (a common problem with digital cameras). While there's some loss of detail in the brightest areas, the camera does a reasonable job.