Here is some good info taken from the www.upgradesource.com.

How many megapixels do I need?

The number of megapixels a digital camera supports will determine the absolute maximum resolution of the photos it can take, along with it's equivalence to a film print.

2-Megapixels: Typical maximum resolution photos of 1600x1200, equal to film quality on a 4x6" print. A great choice if you're not heavily into printing the pictures you take. Normally produces very clear pictures at high resolutions. Makes great prints at 4x6".
3-Megapixels: Typical maximum resolution photos of 2048x1536, equal to film quality on a 5x7" print. If you like to print the pictures you take, this is the best choice for non-professionals. Produces exceptional digital photos at very high resolutions and outstanding prints at 5x7" and smaller. Most digital cameras produced at this time are 3-megapixels.
4-Megapixels: Typical maximum resolution photos of 2272x1704, nearly film quality on an 8x10" print. If you want exceptional digital photos and prints, but can't quite afford the higher-end 5-megapixel cameras, these cameras provide a viable alternative.
5-Megapixels: Typical maximum resolution photos of 2560x1920, equal to film quality on an 8x10" print. This is the best type of consumer digital camera technology currently available. These cameras produce the highest level of digital photos at extremely high resolutions and film-quality prints at sizes up to 8x10 inches! If you are a professional photographer or will be converting many of your digital pictures to prints, this is the type of camera you want.

How about zoom?

Camera makers specify both a camera's optical zoom along with its digital zoom capabilities. Optical zoom is the actual zoom ability of the camera lens. This is the "real" zoom ability that the camera is capable of without compromising any image quality. Higher quality cameras typically have higher zoom levels. Most digital cameras have an optical zoom in the 3x range. Digital zoom is the capability of the camera to go beyond what it is physically capable of by using internal software to enlarge the image. Today's mid to high-end cameras have great digital zoom abilities, but still give up a small bit of image quality to "artificially" zoom image.

What does the camera use for power?

Today's cameras use either traditional batteries (typically AAs) or a rechargeable battery pack (as well as an AC adapter). A camera that uses a rechargeable battery pack will obviously be more cost effective than one using regular batteries that need to be replaced. If you plan on keeping your camera plugged in using the AC adapter (usually an optional accessory) while in use, it won't matter which type of battery power the camera uses.

How does it connect to my computer?

Most cameras produced today connect to your computer using a high-speed USB connection. This allows you to transfer photos to your PC relatively quickly with a typical 1024x768 photo taking about 2-3 seconds to transfer. Older cameras or ones with very few features connect only via serial cable. This is an extremely slow method and these cameras are for those who don't mind waiting a bit. However, you can purchase amemory card reader for your PC that will read the memory card from your digital camera directly at high-speeds. These readers are available for all types of memory cards.

What type of memory card does it use?

How about a camera's LCD screen and viewfinder?

The most well-designed cameras today include both an LCD color screen (usually around 2x2") and a viewfinder. The viewfinder is simply a window similar to what you use on a film camera to see the subject. This is useful when you don't want to waste battery life by using the LCD screen. There are a certain few cameras that do not include a viewfinder. Try to avoid these cameras, especially if you depend on prolonged battery life.

What else do I need to know?

All digital cameras use different types of lenses. So, even two 3-megapixel cameras can take different quality pictures. The color quality may differ, as may the contrast or brightness of the photos. Most camera makers have actual photos taken with their cameras on their web sites. Take a look at these and compare. There are many additional features that today's cameras can include, such as full-motion video capability, various shutter speeds and photo modes, and the ability to add accessories to the camera like lenses, flashes, and tripods. These features among others are also a key selling point once you've narrowed down the models you are interested in.

Advantages of digital photography

1. only print or pay for the good pictures
2. edit your snapshots on the computer (cut out the bad part of the shot)
3. take as many pictures as you want without wasting money
4. back up, archive all your photos easily
5. digital files are easier to keep track of than negatives