Olympus has announced the PEN E-PM1, their smallest Micro Four Thirds shooter to date. Also known as the PEN Mini, this mirrorless system camera is aimed squarely at casual photographers. It looks and handles like a point-and-shoot, but the performance and image quality compete with serious cameras like dSLRs.

Equipped with a pancake lens (like the Olympus M. Zuiko 17mm prime), the E-PM1 is about the size of a typical compact camera, small enough to carry around in a pocket. Equipped with any larger lenses (bigger primes, kit zooms, and especially superzooms), it’ll need to be carried with a neck strap, but it’s still very cool to see that mirrorless cameras have shrunk to the diminutive sizes that manufacturers originally promised a few years ago.

Design-wise, the E-PM1 is reminiscent of the Olympus XZ-1 advanced compact. Its body is predominantly plastic. A 3-inch, 460,000-pixel LCD takes up most of the rear panel, which is otherwise pretty sparse -- no mode dial and very few buttons. It has no built-in flash, though it will ship with a clip-on flash to fit in the hot shoe. The lens mount is, of course, Micro Four Thirds format. The lens selection has really matured as of late, and even better, just about any lens ever made can fit onto the MFT mount with the help of an adapter.

All three new PENs (including the E-P3 and E-PL3) are built around a new 12.3 megapixel Live MOS Four Thirds sensor and TruePic VI processor, as well as a reengineered autofocus system. That sounds excellent. Olympus received widespread praise for the sensor/processor combo in previous PENs (easily outclassing the affordable end of the competing Panasonic G series).  Based on the few samples that have sprung up around the Web, it’s tough to say what degree of difference the new components make, but all the anecdotes indicate that the latest PENs are indeed the greatest.

It’s impressive that Olympus continues to squeeze better results from the Four Thirds-sized sensor, and seeing a top ISO setting of 12800 is noteworthy, even if it ends up looking sloppy in practice. Oly’s JPEG engines have a great track record, too, so that should help to control noise and handle highlights and shadows well.

As for the new autofocus system, Olympus touts it as the “world’s fastest.” It runs through 120 focus cycles per second (up from 60), so it is at least technically faster than previous PEN cameras. The maximum burst rate has increased accordingly, up to 5.5 frames per second (4.1 with image stabilization activated). But we’ll need to see some hard data before we believe that a live-view camera outpaces one with a mirror.

It’ll be interesting to see how the E-PM1 plays with consumers. It’s very plainly aimed at the mass market. We’re guessing that it’ll fall somewhere in the $500-600 range, including a lens. That’s steep for the average consumer, but -- against industry predictions that cell phones would kill the camera industry -- serious cameras sales continue to rise. Some hobbyists that would’ve gone for an entry-level dSLR two years ago might instead spring for a mirrorless camera, and more importantly, there are more “hobbyists” than there used to be.

As for serious buyers, the E-PM1 is too stripped down to work as a main rig, though it could make for an excellent street-style candid shooter, especially with a low-profile lens strapped onto the front. The lack of direct-access controls might be a major barrier to that niche, however.

The E-PM1 has a healthy pool of competitors. The Panasonic GF3 is the most obvious, based on size and looks alone, but that has some obvious disadvantages. Pricing is a big one. The pancake kit will hit shelves at $700, and while we might end up with our feet in our mouths, we seriously doubt that Olympus will price it so high. And we’ll have to wait for some more comprehensive reviews, the E-PM1 just looks like a better camera. The image quality and performance will likely be a few paces ahead of the GF3. It also features in-body stabilization, which keeps down the cost of future lens purchases, and sports an accessory port (though the GF3 does have a built-in flash). The E-PM1’s own sibling, the E-PL3, is also sure to lure some buyers with its titling screen and more fleshed-out control scheme. And then there’s Sony’s NEX-C3, which has both a larger APS-C sensor and a smaller body, as well as a reasonable $650 price tag. That’s a camera to look out for. This whole genre, in fact, is showing some great mass-market promise, and it’ll be fun to see how it plays out.