Like the rest of Panasonic's current generation of G-series cameras, the GF3's noise profile and JPEG processing is much better than before and it does a nice job on midrange ISO sensitivities (ISO 400-ISO 800). That said, the JPEGs aren't uniformly great; in our testing, even shots at ISO 160 had some noise in shadow areas.
The camera's auto mode works pretty well, but this image also shows the type of image artifacts the camera produces in JPEGs. At ISO 320 there's some color noise on the sharp areas, and the out-of-focus areas look mushy like a point-and-shoot's. However, these should only affect you if you plan to retouch the images (in which case you should shoot raw); when printed as-is, you don't see any of this.
The GF3 has a little trouble accurately reproducing intense colors in bright light, especially purples and reds. But the colors are pleasing overall, the tonal reproduction looks good, and you can always shoot raw (or try the Neutral Photo Style) for better accuracy.