In the days of film, it was well understood that the bigger the negative, the better the quality of the picture. The same is true with digital cameras, only here the ‘negative’ is the sensor. The larger the sensor size, the better (generally) the picture quality.
Megapixels do confuse the issue somewhat because you can have small sensors with the same number of megapixels as bigger sensors, so they sound just as good. But smaller sensors have smaller photosites which capture less light, and smaller lenses which can’t resolve the same amount of detail as a larger one. Bigger sensors product less noise, higher dynamic range and smoother tonal gradations.
The bigger the sensor, the more megapixels you can have without sacrificing image quality or increasing digital noise.
The smallest sensors in widespread use are the 1/2.3-inch sensors used in many smartphones and point and shoot compact cameras. This is an old-fashioned way of measuring sensor size across the diagonal and including surrounding circuitry. They are about half the size of your little fingernail, and while they do allow very small cameras in smartphones and compact zoom lenses in point and shoot cameras, the quality is limited, regardless of megapixels.
Some better quality compact cameras have 1-inch sensors. These are much larger than smartphone or point and shoot camera sensors and give better quality. They are a good compromise between image quality, portability and cost for more serious photographers.
The next step up is the Micro Four Thirds (MFT) sensor used in Panasonic and Olympus mirrorless cameras. This is about the base level sensor size for professional photographers and videographers. MFT cameras are small, light and portable, though most expert and pro photographers will choose systems with larger sensor sizes than this, such as APS-C or full frame sensors.
APS-C sensors are the most common of all amongst interchangeable lens cameras aimed at beginners, enthusiasts and even experts. (Nikon calls this DX format). APS-C sensors area around half the area of full frame sensors, and while they don’t quite match them for all-round quality and resolution, APS-C cameras are both cheaper and lighter and an ideal compromise for a wide range of uses.
The next step up is full frame sensors, though there is an intermediate APS-H format used by Canon for its EOS-1D high-speed pro sports/press photography DSLRs before these were merged with the introduction of the full frame EOS-1D X. Canon has since announced the development of a 250MP APS-H format sensor.
Full frame cameras are the most popular amongst professional photographers (videographers often use smaller formats). These use sensors the same size as the traditional 35mm film negative. This larger sensor size offers a choice between medium-resolution sensors which are extremely good in low light and for general use, and high-resolution sensors that capture detail impossible to record on smaller devices. (Nikon calls this FX format.)
Next up is medium format cameras. These were once prohibitively expensive and used only by high-end commercial photographers. Now they’re staging a resurgence and becoming less expensive, more advanced and more popular amongst professional photographers and keen amateurs. More expensive ‘full frame’ medium format sensors are roughly the size of old 6 x 4.5cm medium format film negatives (actually, a few mm smaller to allow for the rebate around the negative), but there’s a smaller, less expensive size roughly half way between this and full frame cameras – this is the size used by the new generation of ‘affordable’ medium format cameras.
This large number of different sensor sizes makes working out lens focal lengths a lot more complicated! Most photographers use the old 35mm/full frame size as a baseline, and if a camera has a smaller sensor, it is only capturing a smaller area of the scene with any specific lens. This is the so-called ‘crop factor’ and lens and camera makers will usually quote ‘effective focal lengths’ to allow for this.
There are also differences in the aspect ratio of these different sensor sizes. 1-inch, APS-C and full frame sensors use the 3:2 aspect ratio of 35mm film, while other sensor sizes use a less wide 4:3 ratio. It shouldn’t affect your choice of which camera system to buy, but it’s just something to keep in mind.