Let's get the negatives out of the way first, because despite the many glowing reviews, this camera does have a few flaws... Firstly, build quality is generally very good, but is let down by a couple of nasty, plasticky bits. The only one that is a real issue is the mode select dial on the top which is flimsy and, on mine at least, a bit squint. For the price, you definitely expect better.
Secondly, the flash is rubbish. In a typical indoor situation, it's too strong and obliterates any detail in your subject, leaving most flash shots unuseable. True, it can be adjusted, but the majority of compact camera can expose flash shots much, much better, and for a fifth of the price!
Thirdly, the range of the optical zoom will rule it out immediately for anyone enticed by today's compacts offering 12x zoom in a similarly sized package.
Finally, the elephant in the room, the Lumix LX3. It's the same, and it's £200 cheaper. That's an inescapable fact, and there's no logical reason for buying the D-Lux 4 instead. You just have to want it, badly.
OK...all that stuff above, it doesn't matter. Not in the slightest. I absolutely adore this camera.
I love the rich, detailed pictures it can take, even in idiot mode, straight to jpeg. I love the way it looks and feels, I love the scope of the menus and controls, whether you want near-SLR levels of manual adjustment, or you want to mess about with all the different scene modes. I like the way that people with some interest in photography say "mmm, a Leica", even if I then admit that it's really a very good Panasonic in disguise.
It's not a replacement for a D-SLR; the sensor will always be too small to get the level of clarity that a full frame, or even compact SLR can give you. And the focal length will always be too small to get that satisfying depth of field, even at f2. But to have a camera that can get you pictures as good as these, AND fit in your pocket...well, I'm not selling my SLR yet, but I haven't used it since I got the D-Lux 4.