I think Apple might be getting ready to re-enter the digital camera business it pioneered in 1994 and then abandoned in 1997. This camera won't be a point-and-shoot as much as it will be a digital photography computer. Frankly, it isn't hard to imagine the hardware. Imagine an iPod Touch with a good camera and lens. That's about it.
There have been some findings recently that back this theory of mine. First, a French Apple site says they've heard that cameras are heading to the iPod line.
There is also this Apple Job Ad: iPod/iPhone - Camera Validation Engineer
Also, Apple is said to be purchasing many three and five megapixel camera CCDs from Omnivision for upcoming embedded products. Most sources indicate that the 3MP cameras are going into next month's iPhones.
The company [Omnivision] is also said to have secured 5-megapixel CIS orders for another Apple product expected to be launched later in the year.
Five Megapixel cameras are good enough to challenge entry-level point-and-clicks for still photography and at the same time record HD video. This is the space being occupied by the FlipHD, and some other basic HD camcorders. From Omnivision's specs of one of their 5.17 Megapixel CCDs:
Incorporating OmniVisions proprietary 1.75 micron OmniPixel3-HS architecture, the OV5630 delivers best-in-class low-light performance, enabling a new generation of high-performance camera phones that deliver top quality digital photography and video in a small form factor.
The OV5630 uses OmniPixel3-HS technology, enabling unparalleled low-light image capture with low-light sensitivity of 960mV/(Lux-sec). The sensor supports automatic exposure control, gain control, white balance, 50/60 Hz luminance detection and black level calibration.
The OV5630 can output data in full 5 Megapixel resolution at 15 frames per second (fps) and record 720p high definition (HD) video at 60 fps or 1080p at 30 fps. For the data transfer of image data, the sensor is outfitted with a two-lane, high-speed MIPI interface. This enables mobile phone makers to use the OV5630s parallel interface as input for a secondary camera while alternately providing output via the MIPI interface.
This means Apple's iPod camera could theoretically take 15 shots per second at full 5 Megapixels. It could also take Full HD at 30 frames per second. It would also work well in low light.
Apple's device would also be an iPod Touch. There's been a new super secret iPhone video recorder editor app inside the iPhone 3 Beta firmware which could easily see its way onto this "touch camera."
Its double life as an iPod touch also means it has Wifi, Photo Apps, and most importantly, access to the App Store. That means you could edit and directly upload your videos and pictures onto the web, Facebook and Flickr. You could even send these pictures to get printed online or at your nearest drugstore. Or just simply use Mail/AIM to send photos to friends.
It also has stereo audio in and out for recording and playback of sound for videos.
It would also probably have GPS and a compass to tag photos. Every iPhone is now a GPS-enabled camera. But very few other vendors have put out GPS tagging cameras. This is an area where Apple could lead/differentiate.
Again, this is an iPod so it would have all of the functionality of an iPod. Music, Maps, Email,VoIP phone, IM clients, etc. so it'd be good to have around at all times. In fact, you wouldn't need much else.
My last piece of anecdotal evidence? Apple also lists this job posting which includes the following skill sets:
We'll see in September.
..is looking for a highly skilled and innovative engineer who is up to playing a key role in delivering cutting edge embedded video processing technologies.
*Experience developing embedded image and video processing solutions.
* Experience working on real-time media and networking applications (WiFi and cellular networks).