The 12-megapixel Panasonic Lumix DMC-GF2 priced at $699.95 (direct) with a 14mm f/2.5 lens (35mm equivalent is 28mm) might just be the best Micro Four Thirds camera you can buy. This compact interchable lens camera has a body size that’s comparable to a small point and shoot, but its images and speed rival that of a D-SLR. The GF2 also spices things up by offering a touchscreen and the ability to shoot real 3D photos via the optional Panasonic Lumix H-FT012 12.5mm f/12 3D G Lens ($249.95 direct, 3.5 stars). Despite offering a great value and counting as one of our 10 best digital cameras, it’s tough to recommend the GF2 over Editors’ Choice Sony NEX-3 ($549.99, 4.5 stars) which offers similiar size, a lower price and larger image sensor.

Compared with its predecessor, the Editors’ Choice Panasonic Lumix DMC-GF1 ($899.95, 4 stars), the GF2 is lighter and smaller, and nearly every aspect of the camera has been upgraded. The LCD now is touch-enabled, you get 1080p video capture, and there are 18 lenses available—including a silent one optimized for video recording, and one for shooting 3D still images. Thanks to its simple interface, and the bright f/2.5 lens that’s included, it’s easy to take beautiful images and video with the GF2. The Sony Alpha NEX-3 though, offers better performance, an even-larger image sensor in a similar size body, and a lower price (assuming the price for the GF2 is in line with the GF1’s price of $899.95). The NEX-3 is still our Editors’ Choice for best compact interchangeable-lens camera.

Design and Features
The beauty of the GF2, like all Micro Four Thirds cameras, is that it offers D-SLR-like speed and image quality, but in a compact body. This is achieved by using a larger image sensor. A top-of-the-line compact point-and-shoot like the Canon PowerShot S95 uses an image sensor that’s referred to as 1/1.7-inch size (surface area=43mm²); the Micro Four Thirds sensor is more than five times larger (225mm²). APS-C sensors (370mm²), like those in the Sony NEX-3, are 8.5 times larger than 1/1.7-inch sensors and 1.6 times larger than the Micro Four Thirds sensors. APS-C sensors also perform a bit better than the GF2’s in low-light, but more on that in later.

Currently the smallest Micro Four Thirds camera, the GF2 measures just 2.67 by 4.44 by 2.16 inches (HWD), including its bundled lens. The front right side of the camera features a slight bump for the grip, but otherwise the GF2 is completely rectangular. The top of the camera has a hot shoe for flash attachments, which you can buy from Panasonic. On the back, above the LCD is a port for other accessories. Unlike the NEX-3, the GF2’s compact body also houses a pop-up flash, which can be useful at times, but generally, I recommend shooting with a bounce flash.

The GF2 provides a solid touch-screen experience: The display is responsive and the UI is quite intuitive. Don’t expect dazzling good looks or multitouch with pinch and swipe, but navigating the menu on the 3-inch, 460K dot LCD is easy. If you don’t want to use the touch screen, buttons to the right of the LCD allow you to navigate the menus and operate most functions. Though there’s a dedicated shutter release button, like on a traditional camera, you can also tap the screen to focus or snap a picture.

There are dedicated buttons for two of the GF2’s stand-out features. First is the iA button: Tapping this puts the camera into fully automatic still image mode. If you’re ever confused or lost in the menus, just tap it and you can start shooting in auto mode. The second button is dedicated to video recording: Tap it, and you’re instantly recording video. Both of these controls aim to streamline the camera’s functions and aid beginner photographers.

Performance

Performance
The Panasonic GF2 is fast. It can power on and shoot in an average of 1.27 seconds, and can continuously shoot at 3.2 frames per second. And there’s almost no shutter lag. The snappiest aspect, though, is the camera’s autofocus. When using the optical viewfinder, top-of-the-line D-SLRs can autofocus and shoot in a few milliseconds, but when using the LCD in Live View, they slow to a crawl. The Nikon D3100 D-SLR ($649.95, 4 stars) takes 2.4 seconds to shoot in Live View mode, and the Panasonic GF2 needs just 0.7 seconds. It’s seriously speedy.

The GF2 takes beautiful images, too. It crushes any compact point-and-shoot, and is more comparable to D-SLR cameras, though true D-SLRs and other cameras with APS-C size sensors (Sony NEX-3) do offer slightly better image performance.

In the PCMag Labs, we use Imatest(Opens in a new window) to collect objective information about image quality. At the lowest ISO sensitivity (ISO 100), the GF2 scored a center-weighted average of 1,802 lines per picture height. That’s good, but at the same sensitivity the NEX-3 can punch out a super-sharp average of 2,248 lines. A traditional D-SLR like the Canon Rebel EOS T2i ($899.99, 4.5 stars) captured 2,258 lines.

The GF2 offers low image noise at high ISO sensitivities, which means it takes good pictures in low light without a flash. The camera keeps noise just shy of 1.5 percent up to and including ISO 1600, whereas the Canon T2i and Sony NEX-3’s APS-C size sensors can achieve ISO 3200 with noise levels below 1.5 percent.

Video Recording, Connectivity, Conclusions
A major advantage to Micro Four Thirds and NEX cameras is that the video-recording experience is typically as good as it is on a dedicated camcorder. Most traditional D-SLRs can’t continuously auto-focus, so features like face detection aren’t available, but it’s all there on the GF2, which is also considerably smaller than a D-SLR. The 28mm lens included with the GF2 isn’t silent (though you can buy a silent lens), so when you autofocus while recording you’ll hear minor noise. Sony NEX cameras, however, bundle silent-iris lenses.

Panasonic decked out the GF2 with plenty of video recording options. You can create large high-quality HD videos, or decent-quality HD videos that are in a YouTube- and Facebook-friendly format. High-quality videos can be captured in AVCHD video (17 or 14 Mbps) at 1080p at 30 interlaced frames per second or 720p at 60 progressive frames per second. MPEG video (6 Mbps) shoots at 720p at 30 progressive frames per second, or at a couple of standard-definition resolutions. All videos are accompanied by stereo recording.

The GF2’s body features a mini-HDMI port, so you can plug the camera right into your HDTV to play back pictures and videos. There’s also a proprietary digital communications port on the back, just above the LCD, which allows Panasonic to get creative with future upgrades—currently there’s an optional electronic viewfinder available. The GF2 doesn’t include an integrated microphone, so that’s likely to be a future accessory offering. My only connectivity complaint is that the camera’s USB port is proprietary, so you can’t replace it with a standard USB cable.

The $699.95 Panasonic Lumix DMC-GF2 with 14mm f/2.5 lens is an impressive camera. Still images are beautiful, video looks fantastic, and it’s easy to operate. Its small size also makes it far more portable than most cameras with similar image quality. If you’re looking for maximum performance, however, the Sony NEX-3 packs a bigger image sensor into a comparable body size at a lower price.