Between all the new digital cameras pooped out before the upcoming PMA show and the crazy cameras buried inside cellphones at MWC, it's a good time to go over why more megapixels isn't necessarily better.
So, the nutshell explanation of how a digital camera works is that light lands on a sensor, which converts the light into electrical charges. Depending on the kind of camera you're using, how the light reaches the sensor may seem different—honkin' digital SLRs house a complicated pentaprism and mirror system that swings out of the way, while the inside of a compact point-and-shoot is mechanically far simpler. At the heart, though, the sensor fundamentals stay the same.
The sensor is where most of the megapixel machismo comes from. When you squeeze the shutter button, the sensor (like film in old-school cameras) is exposed to light for however long you have the exposure time set for. The most common metaphor to talk about how a sensor works is that it's like an array of buckets (the pixels) that collect light, and the amount collected is turned into an electrical charge, which is converted into data. We talked a bit about the differences between the two major types of sensors, CCD and APS (CMOS) earlier.