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The key piece of digital camera technology is the image sensor. Nearly all digital cameras employ either a CCD (Charge Coupled Device) or a CMOS (Complementary Metal Oxide Semiconductor) as their image sensor, and each technology has its pros and cons.
The CMOS has the advantage in cost and power consumption, while the CCD has an edge in image quality. However, advances in the manufacture of each are narrowing the gaps to varying degrees.
Both sensors have similarities. Within a digital camera both are set up in “sensor arrays” with many individual cells each picking up one little bit of light. The cells in an array are set up almost like a checkerboard, and each picks up only one color of light - either red, blue or green.
Fifty percent of the cells are attuned to green light, while 25% detect blue and 25% detect red. The light hitting each cell is converted to a digital signal and that information is interpreted by the camera's processor and stored in memory (usually a removable flash memory card).
Image sensors are like the film in a traditional camera. They're sensitive to light, and the image is recorded there when the shutter opens.