The TS3's photo quality is like that of a lot of point-and-shoots: good with a lot of light, but with a noticeable drop in quality in low-light conditions. Below ISO 400 you'll get very good results with nice color and decent detail. Its main sticking point is with softness; photos--and video--never look really sharp straight from the camera. Add in increased softness from noise reduction at higher ISO sensitivities and you may not want to view or print your results at larger sizes. Plus, there's a visible increase in noise at ISO 800 and above that causes color problems including yellow blotching. Basically, don't expect to be able to take this 30 feet underwater without additional lighting and be able to make huge prints of what you capture. It's more likely you'll end up with good photos that you can share online. In shallower waters, such as with snorkeling or in a pool, you'll get better results, though you probably won't have a lot of fine detail when viewed at 100 percent. As a pocket camera to take along with you to the beach, hiking in the woods, or flying down the slopes, it's a solid option.
To help out with low-light photos, Panasonic includes its Handheld Night Shot mode on the TS3. The top photo here was taken with the camera's Normal Picture mode at ISO 400. The bottom photo is with the Handheld Night Shot mode, which rapidly takes several photos and then combines them into one with reduced noise and blur from hand shake. The camera picked ISO 500, but because of the processing you end up with better color and detail. The mode uses a 3-megapixel resolution, however, so you're limited to smaller photos and it can't be used with moving subjects.
Color is very good, but again, it depends on the ISO sensitivity you're shooting at. With plenty of light you get bright, vibrant results. At ISO sensitivities above ISO 400 colors start to look a little dirty and washed out. Exposure is generally good, too. The auto white balance is warm under unnatural light, so you'll want to use the appropriate preset or take a manual reading when possible.
The TS3 uses a new high-speed CCD sensor and a fast processor that allows for some quick burst shooting--up to 3.7 frames per second. It sets focus and exposure with the first shot, so if you're shooting something fast moving, like a soccer game, the subject might not be in focus.
The lens has some barrel distortion at the wide end (top) and slight pincushioning at the telephoto end (bottom). Despite its softness, the TS3's lens is consistent edge to edge and in the corners. There is fringing in high-contrast areas of photos, but it was typically only visible when photos are viewed at full screen or print sizes.