You’re bound to enjoy the double-takes from passersby when they see you shooting with the Olympus E-P1 – it has the retro look of a 50-year-old rangefinder camera, with its metal body and leatherette grip. Under the hood, though, the digital photo system is very modern indeed. Including the ability to shoot video with an interchangeable lens camera.

And this is the first camera to deliver on the “micro” part of the Micro Four Thirds format promise. Micro Four Thirds was jointly developed by Olympus and Panasonic as a way to build smaller digital cameras that still support interchangeable lenses, by removing the mirror mechanism found in traditional SLR design, using a smaller sensor than SLR cameras and making the lens mount narrower. The first camera in the new format, though, was the Panasonic G1, a fine photographic machine, but only marginally smaller than several SLRs on the market. The Olympus E-P1 is far more compact – still larger than the typical point-and-shoot, but significantly more portable than the rest of the interchangeable-lens pack (especially when it comes to depth) at 4.74 x 2.75 x 1.37 inches (120.6 x 69.9 x 36.4mm). To further enhance the depth-less charms of the E-P1, Olympus designed an ingenious collapsible 14-42mm zoom lens (equivalent to a 28-84mm in 35mm photography). When you’re done taking pictures, simply move a slider switch on the lens barrel and turn the lens: it shrinks down by about an inch in depth, a considerable advantage when trying to stow the camera in a jacket pocket or a bag. Transforming back to shooting position takes just a few seconds.

The E-P1 shoots at up to 12.3-megapixel resolution, and sells for a reasonable $800 including lens. Olympus builds image stabilization right into the camera, so any lens you attach will benefit from this shake-resistant feature (many manufacturers, including Canon and Nikon, provide image stabilization in the lenses themselves, which brings up the cost). Unfortunately, there aren’t a lot of fully compatible lenses to choose from yet in the Micro Four Thirds format.

With no optical viewfinder, all your shooting is done in Live View mode, on the 3-inch LCD screen. It’s a decent display, with an ordinary 230,000-dot resolution but a nice ability to stand up to bright outdoor lighting, as long as you boost the brightness setting. The problem isn’t seeing what you’re shooting, but focusing on it – the autofocus system is very slow. That makes the E-P1 a doubtful candidate if you plan to photograph active little kids, sports or other fast-moving subjects. It’s a shame, because the image quality overall was very good indeed, with the only major problem a high level of image noise.

Another oddity of the E-P1 is the lack of a built-in flash, a feature found on even cheap point-and-shoots. Olympus does offer a compact external flash unit to pair with the E-P1, but it costs $200 and doesn’t pivot or tilt to support bounce flash.

Both point-and-shooters and more sophisticated photographers will find something to like when shooting with the E-P1. The full auto mode uses scene recognition to choose appropriate settings, and produced good results. For those who prefer to tweak settings manually there are two control dials, so adjusting aperture and shutter speed separately doesn’t require any odd machinations.  The go-to feature with SLRs today is video, and the E-P1 offers 720p high-def movie shooting (lower than the top-resolution 1080p mode found in the Micro Four Thirds Panasonic GH1), plus an HDMI out jack to connect directly to a big-screen TV for playback.

Performance (read in-depth performance coverage at DigitalCameraInfo.com)
The E-P1 generally scored very well in our lab tests, with the key categories of color accuracy and resolution particular strengths. As with most smaller-sensor cameras, image noise is a problem – you will notice speckles and clumping, particularly in solid-color areas, when shooting in low light with high ISO settings. Continuous shooting speed is also unimpressive, at a mediocre three shots per second. As for video quality, the E-P1 didn’t test as well as other video-capable interchangeable-lens cameras when it comes to color accuracy and video noise (particularly in low light), though video sharpness was good for a 720p camera. The E-P1 offers a feature rarely found in video-enabled still cameras, the ability to autofocus on a moving subject while shooting, but unfortunately the lens noise while focusing was quite loud, and clearly audible in the video, making the feature impractical.

Comparisons (read in-depth comparisons at DigitalCameraInfo.com)
We considered how the Olympus E-P1 stacks up against three SLRs (the Canon Rebel T1i, Nikon D5000 and Olympus E-620) – the Canon and Nikon shoot video, the Olympus doesn’t. We also used the Panasonic GH1, a video-enabled Micro Four Thirds camera, for comparison purposes.

The Panasonic GH1 offers the most impressive video capability we’ve seen in an interchangeable lens camera to date, largely thanks to its ability to continually and silently autofocus on moving subjects – a large part of the hefty $1500 price goes toward paying for the 10x zoom lens specially designed for both still and video capture. The other key advantage of the Panasonic is autofocus speed, which is consistently impressive and makes Live View action photography practical.

The Canon RebelT1i and Nikon D5000 are both video-enabled SLRs priced at under $1000. Of the two, the Canon shoots better video, the Nikon better still images, though both suffer from a lack of still image sharpness, particularly compared to the E-P1. On the other hand, the Canon and Nikon kept image noise well under control, where the E-P1 struggled. The Canon T1i offers a beautiful 3-inch 920,000-dot LCD, far superior to the Olympus, and of course there’s an optical viewfinder to fall back on when shooting in bright light.  The Nikon screen is lower-res but is hinged, so it can be twisted and turned to accommodate unusual shooting positions. Both SLRs offer a much wider range of lenses than the E-P1, but can’t compete with the compact portability of the Olympus design.

As for the brand-mate Olympus E-620, the two cameras are very similar when it comes to controls, menus and shooting capabilities, though the $800 E-620 doesn’t include a video mode. They also share the same basic lab test profile, with strong color accuracy and resolution results and problems with image noise. The E-620 does have an optical viewfinder and standard autofocus along with Live View autofocus, making it more suitable for action photography.