Let me start with my credentials: I've been working for a major daily newspaper for 23 years. I've won various photo contests, from local and regional contests, to national and international contests such as NPPA, POY, as well as the National Baseball Hall of Fame (several times). I've literally traveled around the globe, covering news features and sports. So, please allow me to lend my own feedback on this camera, which I have owned for several months now. I've also started actively shooting with camcorders such as the Panasonic AG-HVX200 high-definition camcorder, and the Sony DCR-SR30 camcorder.
I'm a proud TZ3 owner (purchasing it with my own funds), and I've been using Lumix cameras since I was issued a DMC-FZ20, at my request. (That camera taught me about versatility when I went to the Superdome and the Convention Center to cover the plight of the survivors of Hurricane Katrina, who struggled to survive the elements following the storm). I've also used the FZ30, and also own a TZ1, the older and less-impressive sibling to the TZ3. And I'd pick this camera, over even the Nikon D2Xs and D2Hs cameras, if I had only one camera to pack in order to cover any breaking news story as of the date of this writing. Why? Because the Lumix line of "bridge" cameras are the most versatile and quick-performing that I've experienced to date. With the pro SLRs, I'd need to carry lenses from a 17-35mm, 80-200mm, and 300mm lenses, to shoot images while all that glass is wrapped into the neat package of the TZ3. Yet the Nikons I own don't shoot video. The Sony camcorder shoots only 3 still images per recording session, which don't match the image quality of the TZ3. And the HVX200 is too bulky.
The TZ3 is a great run-and-gun camera. At a heartbeat, I can switch over to video and shoot some decent footage at widescreen mode (my preference), which is widescreen, at 848 x 480 (better than most hybrid cameras, which tend to shoot only in 640x480. The TZ3 is such a low-profile camera that you can shoot very candid stills and video when you want to capture people at their most human moments.
The body is so compact, I can do 3 very vital and exciting things: place it into tight spaces, shoot without attracting unwanted attention, and mount the camera on unusual items (most recently, a bass drum belonging to a high school student in a marching band, and it recorded video during the band's practice). I've also clamped it onto a wheel barrow and also placed it among stocked food in the refrigerator section. That yields such wide ranging perspectives that could hardly be accomplished with many other cameras and camcorders.
I like keeping the ISO setting at the minimum of ISO 100 or 200, for the digital noise can yell loudly at higher ISO settings. Most recently, I shot a gorgeous image of a moody scene at midnight, with street lamps and the moon being the only light sources on a fog-filled street.
Some drawbacks: I'm not satisfied with the way the camera captures images at the default setting because they seem too washed out. So I set the camera at 2/3rds stop under-exposure. It adds better tonal quality. And the audio quality lacks for the video. I wash the sound in some audio software to crank up the treble, and add some bass. It takes more time, but it helps bring back the muffled sound that gets recorded through a single hole on top of the camera.
The TZ3 is so compact that I carry it with me almost everywhere at work and wherever I go, because in a heartbeat, something could happen. If so, I'd be prepared to document whatever happens. Think about it: on my days off, I'd NEVER carry my Nikon pro bodies. And so this is great for sticking in your pocket for day trips, extended vacations, or a family gathering. If you can just remember that you can capture a moment, just pull the TZ3 out, and within about 5 seconds, you can record what could be some cherished memories.