It is all comes down to what
you want. Any camera or cell phone will take pictures and many people would find the results more than adequate.
Do you want to carry the thing in your breast pocket or would it be OK to need a separate bag?
Are you going to print the images or just view them on the computer? For on-screen viewing, megapixels are rather irrelevant.
Do you think 3x zoom is OK?
Would you like to be able to add some extra lenses or filters?
Are you going to be taking pictures of your roomates throwing up or some beautiful landscapes or mating dogs from 300ft away?
For decent-looking indoor photography, a hot shoe and a proper flash unit is a must.
ISO sensitivity numbers are bollocks when it comes to image quality. Anything above 400 will look grainy and >800 will give you plain crappy images. Of course, that doesn't really matter if you are interested in just capturing the moment no matter how awful it looks
You may want to look at
www.dpreview.com for really professional and detailed reviews with tons of sample images. They also have a glossary thing where all the terms (like ISO) are explained and demonstrated in images.