What equipment should I buy? It is your eye that makes the picture, not the camera. So, never begin like some do on the forums: “I want to take up photography. Which Multi-Megapix camera should I buy, or should I go for a DSLR?”

If photography is already your hobby, you possibly do not need advise anymore. You then probably know that there is no such thing as ‘the best camera’. Being completely accustomed to your equipment, whatever that is, is much more important, and that will always mean working with, as well as working around the limitations of every camera. See also a nasty remark at the end of these lessons.
If you are ‘new’, start with the simplest camera you can get, probably old fashioned film. Even, try some single use camera’s (make sure that the factory re-uses them!!) and start your hobby. This is especially good for getting the feeling for the three stages of taking a picture.
Some things to consider:
(1) Look at both pixel count and size of the chip. The 14 Mpix. of a compact camera sits on a tiny chip of a few millimeters, and thus noise and noise reduction limits the use of you pictures. Though 14 Mpix. might be enough to produce an A2 enlargement, the picture quality of a compact will most likely not be good enough. Luckily, the trend is now towards less pixels and slightly bigger chips for compacts. A DSLR is always superior if you want to get serious with photography.
(2) When you buy a DSLR, you buy a system and commit your loyalty for a long time. Each system has its pros and cons — the Olympus 4/3 system suffers from the Panasonic chip which is not as clean on high ISO as the competition (still, but it is getting better). But Olympus makes very good lenses. It might be wise to first buy a good compact, and see what kind of photographer you are, and then marry yourself with a system that is good for what you want.
(3) The current (N.B.: I wrote this 2011, when I used the Oly E330!) development is, I definitely think, towards a merging of photo and video camera’s, and towards the disappearing of the mirror in high quality camera’s. Electronic view finders are of sufficient quality now, and having constant live view is becoming the standard. For me, the drawback of the Olympus E330 compared with the Minolta D7 is the lack of a good life view. The Minolta had an interactive viewfinder where one could place the auto-focus cross hair on the spot where one wanted the focus, and there was a histogram for exposure. With that camera I always shot with manual exposure, setting the exposure with the aid of the histogram. I would buy from a brand that is developing such camera’s at present.

Elsewhere on the web:

This is the page that explains the three stages in photography.