In many ways, you might consider Nikon's D40 the of digital cameras. Is it a digital SLR with the spirit of a point-and-shoot? Is it a point-and-shoot with the power of a dSLR? It depends upon who's doing the shooting. While the D40 will never morph into an ultracompact or grow up to be high-powered, pro shooter's camera, it covers the in-between fairly well.
Positioned at the very bottom of Nikon's dSLR food chain, the company aims the D40 at first-time dSLR buyers moving up from tricycles to training wheels. As such, it contains an assortment of preexisting parts from its siblings: the same (or very similar) 6-megapixel sensor as its predecessor, the D50, the same processing engine as the D200 and the same 420-pixel sensor 3D Color Matrix Metering II metering system found in the D80. Assuming that the dSLR-craving hordes of newbies don't have any lenses yet, Nikon sells only a kit version, bundling in its new f/3.5-to-f/5.6G, 18mm-to-55mm II ED AF-S DX lens (28.8mm to 88mm equivalent). This assumption also informs Nikon's decision to remove the coupling pin from the lens mount, limiting the capabilities when interfacing the camera with lenses other than the newer AF-S and AF-I models. In other words, this isn't your father's Nikon, and it isn't the camera to buy if you've got a stash of Dad's old Nikon lenses. (You can find the compatibility details here).
Following recent trends in entry-level dSLRs, Nikon dropped the second status LCD on top of the camera in favor of a more hands-on role for the 2.5-inch LCD on the back. A single button press brings up a display of all your current settings; a second press allows you to navigate and change those settings using the four-way-plus-OK navigation switch and command dial. If you're used to shooting with a snapshot camera, it will feel very familiar; if you're accustomed to more streamlined combinations of buttons and dials, it can feel a bit clunky. For instance, in aperture-priority mode, you can change the aperture only via the command dial; to change the shutter speed, you must go through the aforementioned process. Nikon does provide an Fn button to which you can assign button-plus-dial access to image size/quality, ISO sensitivity, white balance, or drive mode, but I just hate it when manufacturers force me to choose an arbitrarily most-important setting from among several important ones.
Nikon did bring the viewfinder up to date, one of the things we complained about on the D50, by upping the magnification from 0.75X to the more common 0.8X. Interestingly, it still lacks a grid overlay, a feature I'd think many beginners would appreciate--plus some of us veterans who still have problems getting that horizon line right. And Nikon actually dropped the number of focus selection points from 5 to 3. When I shoot, I use only the center point--after a brief flirtation with eye-controlled autofocus in film cameras, I returned to that old focus-and-recompose school--so it didn't bother me. However, if you use the various automatic focus-selection-point modes it could make a big difference in your shots.
The D40 also gets high marks for photo quality, with very low-noise images, minimal lens distortion, excellent metering and exposure, and pleasing colors.