**** July 12,2007 update *****
We've had this camera for 9 months now, and we're still awe at the movie mode and the incredible zoom. People who see the movies we take can't believe that they were taken with a regular camera. With a 2-year-old and a 3-month-old, being able to clearly record the sights and sounds as they grow is priceless. I only wish I'd had a camera like this when the other kids were younger. Everything written previously (below) still holds, and we continue to be just as happy with the camera. The only problem, as mentioned, is that you'll want to take so many pictures/movies that you'll want to buy more disk space to store it all (which we did). Also, there's only been one time since we've had the camera that we've run out of space using the 4GB card -- a great thing to have with this camera. All that being said, the comments originally made below about image quality in the photos still holds. That's the one thing that could be improved, especially in low light situations. But some good news is that after 9 months there continues to be no significant whining problem with this camera.

**** Dec 25, 2006 Update ****
We've now been using this camera for over 3 months, and continue to be very happy with it. The whining problem is not an issue, as we keep the movie volume set on medium. The advantages of having such a powerful zoom continue to impress us, and as mentioned in the review below, this often more than compensates for the slightly lower lens quality compared to our previous camera. The movie mode is so wonderful that we take many more movies than we used to, but since quality movies take up so much space, we are quickly filling up our hard drive space. To see the review on our hard drive click here
http://www.epinions.com/content_253851242116

**** Original review ****
Even though our first digital camera took higher quality photos, the other features this one has make it a very good choice. After 3 years of heavy use, we lost our first camera, a Canon G2, during a hiking trip. We wanted to replace it with a camera that would take both high quality movies and high quality photos. Although we found that no camera in our price range could do both these functions as well as we'd like, this camera was a good compromise.

First the Disadvantages.
This camera does not have a lens that can match the quality of many cameras. While it may beat out the Canon G2 in terms of megapixels (6 vs. 4), that cannot make up for lens quality. What this means in practical experience is that crystal clarity is replaced by a slight graininess, especially when one zooms in on a portion of a photo after it has been taken (using computer software). With a quality lens such as the G2, you can zoom and zoom on a picture that has been taken and still retain quality.
A related consequence is that the camera cannot handle low light situations as well. While having higher ISO levels is supposed to help, this cannot make up for lens quality. One measure of lens quality is how low the f-stop can go. The G2, for example, could go as low as 2 while this S3 IS can only go to 2.7. What this means is that photos taken in low light have more grain and blur than you'd see with a quality lens such as in the G2.
There appears to be an issue with this camera's sound during movies: a whining noise can be heard in the background. The intensity of the whine is lessened when you adjust the audio of the microphone downwards, but it's still there. We actually returned the first camera we purchased because of this issue, and though the whine was much less in the replacement, it is still there. A search on the forums at DPReview.com showed that others have experienced this too.

A "disadvantage" that is perhaps unavoidable is the amount of memory that will be required to store all the movies made with this camera. For example, a 6 minute movie we recently took required 730MB. A related disadvantage (compared to digital camcorders) is that this camera cannot exceed 1GB for a single movie. I tested reaching that limit, and found that I could take a 9 minute 30 second movie. We purchased more hard drive space to deal with this issue.


Now the Advantages.
What the lens lacks in quality is to some extent made up for because it can zoom so well. The Canon G2, for example, only had a 3X zoom, which pales in comparison to the 12X on the Canon S3 IS. To some extent this means you can zoom in while taking pictures rather than after taking them. Having a zoom this powerful is really nice. With the G2, by contrast, I often felt frustrated by how "far away" we had to be from the subject (like at a kids soccer game).
This camera can also zoom during movie mode...something that makes a huge difference how interesting the movies are.
We researched the movie mode quite a bit, and did not find a camera that could compare with this one (excluding camcorders). Some website such as DPReview.com provide both photos and movies from this and other cameras for comparison. Based on looking at those, as well as our experience with the G2 and friend's cameras, the S3 IS seems to have the best movie mode available (at least in this price range). Furthermore, this camera has the ability to take full quality photos in the middle of movies, and to record stereo sound. For example, taking movies of our baby boy using the maximum zoom allows us to capture all of his cuteness with wonderfully clarity without him even knowing. It's true that digital camcorders can do this even better, but we wanted to be able to take high quality photos as well.
While many other features could be listed, I'll focus on what we use most. My wife loves to take macro-mode photos of flowers. Unlike the G2, this camera does not have a limit on how close you can get to the flower. It can even focus on something touching the lens (although when you get that close adequate light becomes a problem). It must be admitted that while the quality is good, it is not excellent.

Also, when you hold down the shutter, this camera can take several high quality photos every second. This is great for action shots, although we've discovered that you need to limit camera motion to avoid blur during such shots. The anti-shake feature (the "IS" part) may help reduce blur, but it cannot make up for excessive camera movement.
The user interface on the camera is a little bewildering at first because there are SO many things you can do. Because of that, it's not a camera for the faint of heart. On the other hand, pointing and shooting works well in auto mode. The software that you install on the computer is also quite good. We were used to this from using the G2 (it's the same software), and it also is loaded with many more features than the average user will ever use. It's definitely a camera you can grow into.
As with my other reviews, I'll post more here as we gain further experience with this camera, particularly if our opinion about it changes.

Recommended: Yes

Amount Paid (US$): 370 incl tax
This Camera is a Good Choice if You Want Something... Flexible Enough for Enthusiasts