Do you own—and still use—a digital camera? Would you buy another one? I ask because I was at a recent event where several people took a number of pictures, and as you can probably guess, all of them used their smartphones to take those pictures. I didn’t see a single conventional camera.

That’s because, as Liz Cutting, executive director and senior imaging analyst at research firm NPD Group, says, the best device is the one that’s at-hand when a moment happens that is worth taking a picture. It should be noted here that Cutting’s research shows that consumers who use their mobile phones to take pictures and video were more likely to do so instead of using a camera when capturing spontaneous moments, but for important events, single purpose cameras or camcorders are still the device of choice. I’ll go even further, and say that in my general observations, it seems that cellphones have become the device of choice for taking pictures. Sure, a single-purpose camera may be used for a high school graduation or a piano recital, but even for holiday or birthday parties, it seems that most pictures are now taken with phones.

The reason is that not only are cellphones now suitable for taking high-definition photos and recording videos, they also make it easy to transfer those pictures and videos to sites such as Facebook and Flickr. Consequently, sales of so-called “point-and-shoot” digital cameras that fit in consumers’ pockets have taken a noticeable hit.

For example, according to findings in NPD’s recent Imaging Confluence Study, sales of entry-level cameras began to slide in 2009 as improvements were made to picture-taking phones’ auto-focus, zoom, and low-light features. Then, through November, 2011 U.S. retail sales of entry-level cameras fell 17 percent to 12 million units from 2010, according to NPD. What’s more, U.S. consumers used smartphones to snap 27 percent of their photos last year, up from 17 percent in 2010, according to NPD data through November. Conversely, the share of photos taken with a point-and-shoot camera fell to 44 percent from 52 percent.

That point has not gone unnoticed by camera manufacturers. As a recent Businessweek article explains, Sony, Canon, and Samsung Electronics are all poised to introduce inexpensive digital cameras that include new standard features. The trend is sure to continue as well. Indeed, all manufacturers, including Samsung, need to focus on the value proposition of a camera and what differentiates it versus a smartphone, says Reid Sullivan, a senior vice president of Samsung, in the article.

The result is some cool cameras will soon be available. Sony’s newer cameras focus on taking pictures in 3-D and on capturing and downloading images even in extreme conditions using zoom lenses that capture photos at greater distance and with more clarity than phones. Canon’s flagship point-and-shoot will be called the PowerShot G1X, and will include the ability to prioritize face detection of children to ensure better pictures. Finally, Samsung is introducing a camera that allows users to upload images and videos directly to online sharing sites, including Facebook, Flickr, Picasa, and YouTube.

Those cameras certainly sound interesting, but the more intriguing aspect is the changes taking place in the market. Camera companies noticed sales were sliding due to competition from an unlikely source. To battle that competition, they quickly coordinated supply chain partners and activities to bring new product to market. Furthermore, an interesting twist is that while camera manufacturers must compete with mobile phone manufacturers, they also must continue to compete with each other. I suspect prices will also fall in a bid by camera manufacturers to make cameras even more appealing to consumers.

The situation certainly demonstrates how new, unexpected competition can have an impact on a market.