Chuck Westfall – One of Canon’s Guru’s has been asked on Digital Journalist:
I have a pair of questions concerning point and shoot cameras: If a user decreases the pixel count on a Canon PowerShot G9 from 12MP to 6-8MP does image quality improve at higher ISO settings and in low-light situations? Does decreasing the pixel count essentially create a bigger sensor with fewer pixels, such as is found on a Fujifilm FinePix F30 or F31fd?
There is no significant improvement in noise levels at any ISO setting when shooting in-camera JPEGs at the 8MP “M1” or 5MP “M2” settings with the PowerShot G9, compared to shooting full-resolution 12MP images. However, if you are interested in extracting the maximum image quality the G9 can produce, I would suggest using the camera’s RAW mode and applying noise reduction during post-processing in your personal computer. Canon’s RAW Image Task software, supplied at no extra charge with the G9, has an Adaptive Noise Control slider that does a good job at reducing noise while retaining a high level of fine detail. The resulting images, especially when printed, tend to be sharper with less noise than those produced by most other point-and-shoot digital cameras regardless of resolution or pixel size at equivalent ISO speed settings.
LifeSpy Well there you have it!
Also see the post on noise reduction for Lightroom and ACR