Basically, there are 2 types of digital cameras in the market, ie. the Point-N-Shoot (pns) and the DSLRs... PNS are very small and compact and light, as compared to DSLRs... DSLR has many knobs and manual functions that you can play with, unlike pns where it is mostly "auto" mode... Also, for DSLR, you can change to different kind of lenses to take good pics in different environment/condition, unlike pns where you have one fixed lens only... So, first of all, you have to decide which type of digital cam that you are looking for, before proceeding with checking out the different models available...
I hv bought a pns (point-n-shoot) camera few months ago, Panasonic Lumix LX3, just for taking pics of my ragdolls. Hahaha... I would highly recommend this pns becoz it has very large aperture, ie. F2.0 (in fact the largest for pns in the market now), which means that you can take clear and sharp pics in low light environment without using flash... Also, with larger aperture, it means you can take clear pics at a faster shutter speed, which is very good for taking pics of our forever moving pets...

LX3 has shutter speed of 1/2000sec, which is very fast... Another pns which is LX3's equivalent is the Canon S90, which has a F2.0 and 1/1600sec.. If you are looking for a good camera to take pics of your pets, then these 2 pns is worth considering... Pricewise is also quite affordable, ~USD$300-$400. Some reviews of the LX3 and S90 are as follow :-
http://www.dpreview.com/news/0807/080721...niclx3.asp
http://www.cameralabs.com/reviews/Panaso...x_DMC_LX3/
http://www.photographyblog.com/reviews_p...mc_lx3.php
http://www.luminous-landscape.com/review.../lx3.shtml
http://www.dpreview.com/news/0908/090819...andson.asp
http://www.steves-digicams.com/camera-re...eview.html
http://www.photographyblog.com/reviews/c...90_review/
http://www.luminous-landscape.com/review.../s90.shtml
For a side-by-side comparison, you can go to this website and check them out :-
http://www.dpreview.com/reviews/sidebyside.asp (select and add the digital cameras that you would like to compare)
Last month, I bought my 1st DSLR, Pentax K-x, as my b'day gift... LOL... The image quality is amazing! I really love it very much... And the price is very cheap as compared to other brands like Canon and Nikon... I paid for this K-x at USD$560 only, which comes with a 18-55mm kit lens! This K-x is the cheapest entry level DSLR in the market now, and it has won the "Best Entry Level DSLR" award for TIPA 2010..

Also, there are over 100 colours to choose from, you will be spoilt for choices...

I bought the white colour K-x, perfect!
But, there are many other good entry level DSLRs too, eg. Nikon D3000/D5000, Canon 550D/500D, Sony A230/A330... My suggestion is that you have to go to the shop and have a hands-on "feel" of the DSLR and try it out, before you know whether you like it or not... Hehehe..
But, I hv to admit that I am still a noob in DSLR world, and is still learning how to take good pics using a DSLR... Have to learn from experts like Linda and Lindsey and Teresa and others..... Hehehe... You can check out this K-x below :-
http://www.tipa.com/english/award-detail...ry%20Level
http://www.photographyblog.com/reviews/p...kx_review/
http://www.psfk.com/2009/12/100-differen...eries.html
http://www.dpreview.com/reviews/pentaxkx/