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Several factors affect decisions about memory card capacity. First, of course, is how much shooting you do. If you don't take many pictures, then you don't need a high-capacity card.
There are other factors, though. One key consideration is your camera's resolution. The higher the resolution, the fewer the number of picture files that will fit on any given memory card. All other things being equal, an 8 MP camera will produce much larger files than a 5 MP camera.
For example, a 6 MP camera, with an average file size of 3.60 MB (JPEG Fine setting) can save about 140 images to a 512 MB CF card. A 4 MP model, using the same setting, and with an average file size of 2.44 MB, can write about 210 image files to the same capacity card.
Another factor is the file type you shoot and the degree of compression (JPEG only). If you shoot TIFF files, you'll need large capacity cards, because TIFF files are huge. On the other hand, if you shoot at your camera's minimum resolution and save the files as JPEG's with maximum compression, you'll be able to save huge numbers of files.
For example, shooting at VGA resolution (640 x 480) and using maximum JPEG compression, the 4 MP camera above can store over 3,000 image files on a 512 MB card.
Finally, under some circumstances, your ability to download files can affect your decision. For example, if you shoot a lot of pictures when you travel, and you travel a fair amount, larger capacity cards make sense.