Okay, so it's barely any smaller than its predecessor, the E-410, but Olympus needs a hook so the camera vendor is touting its latest DSLR as the "World's Smallest Digital SLR." At roughly 5.1 x 3.6 x 2.1 inches, the E-420 is smaller than most of its competition, and at 13.4 ounces, it's also lighter than most (but 0.2 ounces more than the E-410). Almost more important to the pocketability of the overall package, Olympus also announced a low-profile Zuiko 25mm f2.8 kit lens (equivalent to 50mm in the Four Thirds standard) that's just 0.9 of an inch thick (camera plus lens = $499.99). You can also get the E-420 in a kit with a relatively compact 14mm-42mm (28mm - 84mm equivalent) f3.5-f5.6 lens for $599.99 (both kits shipping in May).
The E-420 is a relatively minor update to the E-410, and has a similarly dated look (which, I have to admit, I kind of like with its leather-look grip--but that could be because I grew up in the '80s). New features include a bigger and better 2.7-inch LCD, Auto-focus in Live View mode, wireless flash capability, and new face-detection technology and Shadow Adjustment technology. Olympus also says it has improved white-balance algorithms and bumped up continuous shooting speed up to 3.5 frames per second. A nice touch is the Perfect Shot Preview (which lets you preview special effects onscreen so you can see what the image will look like before you shoot). Perfect Shot takes good advantage of the Live View mode that most new DSLRs now include, which Olympus pioneered back in 2006 with its E-volt E-330. Some Live View trivia: the original Live View mode in the E-330 used dual sensors rather than the more-prevalent and more-clunky solution of flipping the mirror up and down (which the E-420 uses), though David Pogue seems to think Sony invented this.