I appreciate the difference between the huge full-frame 24 x 36-mm sensor and the smaller APS-C size sensor used in DSLRs, but what about smaller cameras? I want to get a high-grade camera with a built-in lens for use when I cannot carry my full DSLR system, but I’m confused by the entirely different sensor sizes.
Well, Elliot, even in DSLRs there are actually four sensor sizes, including the Four-Thirds (13 x 17.3-mm) format used by Olympus, as discussed in a previous Q&A, What is “focal length magnification” and how does it work? But yes, the situation is a bit more complicated with the cameras with a built-in lens, since there are even more sensor sizes. You can find information as to the exact dimensions of the most common types, plus diagrams that provide a useful visual perspective, on this website: Compare camera sensor sizes.
Since you are considering an enthusiast-level camera for serious photography, you’ll want to avoid small sensors. Here’s why: at any given number of megapixels, a larger sensor will have larger individual light sensitive dots (photodiodes) for greater dynamic range and higher ISO image quality. The 1-inch (9.6 x 12.8-mm) chip, used in the Sony Cyber-shot RX100 III and other cameras, is much larger in area than the more common 1/1.7-inch sensor and dramatically larger than the 1/2.5-inch sensor used in the inexpensive digicams. (The Sony Cybershot RX1R has a huge 24 x 36-mm sensor but sells for $3000.)
A few cameras with a built-in lens are equipped with an even larger sensor, such as the new Panasonic Lumix DMC-LX100 which employs a portion of a Four-Thirds sensor; the effective imaging area is roughly 1.6x larger than a 1-inch chip. And the Canon PowerShot G1 X Mark II uses a so-called 1.5-inch (14 x 18.7-mm) sensor, not a common size. A few integral-lens cameras employ the even larger APS-C size (15.8 x 23.6-mm) sensor, including the new Fujifilm X100T and the other X-series models. Naturally, any oversized chip mandates a larger camera body and lens.
The above may have answered your question, but what’s the bottom line? In my estimation, a camera with a high-grade lens and a 1-inch or larger sensor should provide the excellent image quality that you’re expecting. If portability is of great concern, be sure to check the size/weight specifications of suitable models. But if you must often shoot at ISO 3200 or higher, look for a camera with the 1.5-inch or larger chip since that will allow for oversized pixels. Also find some online test reports of cameras you’re considering and buy the one that gets the most favourable ratings.