The Sony RX100 is the best compact camera you can buy, but $650 is a lot of money. If you want to spend a lot less, the $300-$400 Panasonic LX7 is a fantastic advanced camera alternative, with sharp and accurate images, although it is not the smallest camera. It replaces our current pick, the Canon S100, which has been king for a while.
With smartphones devouring the low-end camera market, manufacturers have been focusing their attentions on the high-end instead, producing great cameras like the $400 Nikon P7700, the $380 Canon S110, the $450 Canon G15, and the Panasonic LX7. All of these are solid choices for bringing some serious manual controls, raw shooting, excellent images, a 1/1.7-inch sensor, and fast lenses to a pocket sized camera. But, after poring over reviews and spending hands on time with all of them, it’s the LX7 that gets our pick.
A good—but not super high end—compact camera needs to focus primarily on a couple of things: sharp, low-noise, and color accurate images for its price, and a stupidly wide variety of manual controls which are preferably on knobs rather than requiring you to dive through menus. Specifically, we’re talking about external buttons for changing commonly altered features like white balance, metering, ISO, and focus mode; an external flash hot-shoe; custom shooting modes; and additional high level tools like expansive noise reduction settings, bracketing, digital levels, and most importantly, shooting in raw. These camera tend to be aimed at photographers who know their way around a camera, and are maybe looking for a smaller backup to their usual DSLR rig, namely people who are more than a little demanding. That means all the manual control of a DSLR in a smaller package, and a combination of a sensor larger than most point-and-shoots (but smaller than a DSLR or mirrorless camera), sharp lens, and good processing in order to take superb photos. But also keep an eye on the size, those plentiful external controls can sometimes make these things blow up to ludicrous proportions.
You'll also want to consider the difference between a fast lens that lets in lots of light, and one with a longer zoom so you can shoot from further away. The LX7 doesn’t have a super-long zoom, but more than makes up for that with a lens that lets in an abundance of light, with a maximum of f/1.4 at the wide end, and f/2.3 when fully zoomed.
Also, how does the camera handle in low light? Does it have trouble focusing? Is it fast to shoot? How big is the thing? How tough is it? There's a long tradition of high-end compacts being near bulletproof — you'll probably find a Canon G7 that's weathered a bomb blast if you search hard enough. Also, some users want a compact camera that can take a flash or lens filters, which is another high-end feature to watch out for.
Before we go any further, It's worth noting that for this same price, you could also pick up an entry-level mirrorless camera that's a year or two old, which is certainly a good alternative. Then you'd be able to tap into the vast world of interchangeable lenses, and if you used a flat pancake lens on one of the smaller bodies, it might even be smaller than the LX7. But, for an all-in-one, ready to shoot, no need to swap lens rig, the LX7 more than holds its own.