Before I jump into the how-tos of camera buying, let me make one thing very clear: Buying a good camera will not make you a good photographer. If you do not know what a fancy gadget-enhanced multi-million pixel camera does, it won’t help you.
The best way to take better pictures is to take more pictures. If you really want to improve your photography skills invest at least 40 solid hours into taking pictures, talking to a photographer, taking a class, or reading a book.
Minimalist Photography 101 will give you plenty of reasons why you don’t need to upgrade. Every salesperson and their sister will give you reasons why you should. I’m here to explain your options.
The first decision you need to make is whether you need an SLR (Single Lense Reflex) or a compact camera. SLRs have lenses that come off. They are big, bulky and expensive. They also provide exceptional optical quality and plenty of manual controls. Compact cameras (also called point and shoot) are all-in-one cameras. Their lenses don’t come off and they come in a variety of sizes, usually about the size of a pack of cigarettes.
When you buy an SLR you also have to buy a lens (or two or three or six). This substantially increases the price. A good SLR lens will cost at least the same as the camera body. That said, you get what you pay for...if you know how to use it.
I shoot with a Canon 40D. Nikon’s D7000 is equivalent quality. Wars are waged over which brand is better. I’m not choosing sides. Any of the SLRs made by either of these manufacturers are a great place to start. Both of these SLR bodies will run between $800-$1000.
If you’re considering advancing from the cheapest line of SLRs, make sure you know what you are are paying for. Most of the additional features you gain by upgrading to a Canon 7D or Mark III, or to a Nikon D300, are not worth the extra expense unless you are a professional.
I carry 3 lenses. Standard, wide angle and telephoto. I’ve gradually upgraded over the last 15 years to high quality lenses. Start with a cheaper standard zoom (about a 24mm-80mm), and telephoto lens (100-300mm) and upgrade as your budget and knowledge improve.
Anything made by Canon and Nikon are highly recommended. Cheaper brands may work as you start out, but for a long term investment, stick with the name brands. Here is a full list of my camera gear, for your reference.
If you’re serious about taking some awesome photos, but don’t want the bulk of an SLR, here are the best of the best of compact cameras: Canon PowerShot S95 (or newer S120), Nikon CoolPix S8000 (or newer Coolpix A), and the Olympus XZ-1. Most are in the $300-500 range, and have the controls of an SLR camera without all the extra bulk. Models change all the time, so check manufacture sites and use an independent retailer (like B&H) to compare different models across brands.
For more information about specific features to look for in a camera and reasons to ignore meaningless marketing hype like "megapixels" and "digital zoom", check out Part 2 of Buying a Digital Camera.