Higher resolution? Camera makers exhausted consumers' lust for higher pixel counts long ago. All those pixels just create a burden of bigger file sizes to deal with.
Smaller? Small is nice, but with pocketability comes lower quality lenses, smaller displays and cramped controls.
Easier? Many digital cameras are already brain-dead easy to use -- literally point and click, with great results.
There are three ways digital cameras can and probably will improve, and they're exciting developments. Cameras are about to get:
1. Fast. From initial boot to snapping pictures will eventually be reduced to a second or less. The time between pictures should come way down as well. Look forward to ordinary consumer cameras shooting ten frames a second. Eventually speed will transform how a camera works. You'll just shoot high-def video, and every frame will be a print-quality photo. Just choose the one you want from the thousands of "frames."
2. Cheap. The electronic parts of a camera will continue to drop in price, with the prosumer cameras of today being tomorrow's budget family snapshot makers. Today’s mid-range cameras will drop to under $100. However, all this price reduction has to level off at some point, because the price of the lenses can only go so low.
3. Smart. And now we get to the really exciting bit. Cameras are gaining the ability to know things about their environment, and embed that information into the pictures you take. For example, cameras like Sony's Cyber-shot HX5 uses internal GPS and compass together to determine where you and are which direction the camera is pointing. With that information in hand, objects in photos could be identified. With the right software, for example, a photo of the Washington Monument might be automatically hyperlinked to the Wikipedia entry.
Casio is taking location awareness even further. A new camera unveiled at CES uses GPS, but augments that with two additional features. First, objects onscreen are identified based on location, if they're known "points of interest." Second, the camera uses accelerometers and an orientation sensor to figure out where you are even when you're indoors without GPS satellite access.
Speed, cost and sensors are the big ways digital cameras will improve. They'll also get better in a thousand small ways. For example, more cameras will get Wi-Fi and mobile broadband connectivity. They'll become social, enabling the sharing of photos from camera to camera or from camera to cell phone via Wi-Fi or Bluetooth and also auto-posting on social sites like Facebook.