Contrary to popular opinion and all those shiny camera ads, more pixels don't really translate into better pictures. The New York Times has written about it here. here's the less than 100 word version:

More pixels do capture more photons per second, i.e. more picture details. However, censor sizes in compact cameras that most of us buy haven't gotten bigger, so more pixels in smaller cameras actually result in smaller pixels, which is not something worth paying more for.

Reportedly, the small image sensors of existing compact cameras work best with upto 8 megapixels. On the other hand, “pro-sumer” D.S.L.R. such as Canon Rebel XSi ($600), Canon 40D ($920), Nikon D80 ($640), and Nikon D90 ($1,000) produce better images because they have larger image sensors for the same megapixel rating and their pictures come out much better than those from normal compacts.