Response to: Focal Length
Okay, here is another way to explain it... If you took a 25mm wide piece of film and taped it in the back of a 35mm camera, took a picture, then enlarged it to 8 x10 you would obtain a "closer" image than if you used 35mm film. Due to cropping? Yep. Quality reduced? Yep, because of more enlargment necessary WHEN PRINTING it. So, what this digital question really boils down to is the quality of capture for a given area. If you use a 'super duper' film, with 1/2 the grain for the 25mm piece, you would get the same quality of print with more "magnification" and the same lense. So, applying this to a digital camera, it essentially comes down to the question of what's smaller, film grain or electronic pixel. If the pixel is 1.6x smaller, then you get the same quality (hopefully someday, getting closer). If the pixel is the same size as the film grain, you would get the same quality digitally as you would with the 25mm film.
Also, someone above stated that anything over 200 dpi is a waste. That is not entirely true .. 200 dpi 4x6 will be very poor if you try to print it at 8 x12 (100 dpi after magnification). However if you start at 600 dpi 4 x 6 and enlarge that to 8 x 12, you still have a respectable 300 dpi. So, higher resolution is very important particularly for large prints. The problem with scanners is that although they create more pixels, they aren't optically detecting any additional detail. Its much the same thing as the 'digital zoom' on consumer level cameras ... Nothing you can't do with the little magnifying glass on your computer screen, yet a great marketing tool to get more money from unwary consumers.