The LCD is small and low-resolution, and the colors it displays bear no relation to the colors as rendered in the videos. There's a joystick on the LCD bezel for awkwardly navigating the menus through a poorly designed interface. I lost an afternoon's testing because I thought I'd switched the video settings, but the camcorder makes you jump through so many confusing screens -- do I click OK? Next? "X"? -- that it turns out I hadn't actually successfully changed them.
And you really do need to change the defaults. The out-of-the-box video quality is set to 1440x1,080 60i (interlaced) at a bit rate of 9 megabits per second. If that doesn't mean anything to you, that's state-of-the-art -- for 2008. It's awful. Switching to the best quality of 1080/60p delivers something more along the lines of what I'd expect for $200, but it's still pretty mediocre. Mushy and bleeding edges, poor tonal range...if all you're looking for is to be able to show someone's doing something then it might suffice. You can get better video quality out of a standard camera like the Canon PowerShot SX260 HS, with its 20X zoom lens, for about the same price. The video quality is identical to last year's model, the . Also, you'll probably get better still photos from your phone.
The autofocus works pretty well, though the video is soft enough that you'd be forgiven for thinking it's not in focus, and like all AF systems it makes pretty poor choices about what the subject of the scene is. It does focus quickly, though. The electronic image stabilization is on par with the image quality -- that is, just OK.
When you power on the camcorder it points you online to download Sony's PlayMemories Home software, which is Windows-only. Mac users aren't missing anything, though; AVCHD is now well supported by all third-party applications (here are instructions for downloading video on a Mac) and the best thing I can say about PlayMemories is it's free.
If you're looking for an action camera, image quality is secondary to mountability, but the fact remains that you have to pay at least $400 for a base model that delivers decent quality.