It's no secret to people who use a P&S how convenience and portability plays a key role as to why we bring it along instead of the bulkier dslr. There was a time when a dslr was the only way one could achieve "kick ass" images as the limited performance of a smaller sensor and features on a P&S meant missed opportunities more often than not.
It wasn't to say you couldn't get nice images with the smaller cameras, but there were many limitations.
Having spent quite some time on DPReviews' Panasonic forum, you quickly realize how that has changed. With the features and performance of a P&S making significant leaps forward over the last few years, even the hard core DSLR users are realizing a P&S is a great addition to one's photography arsenal.
I presently have three cameras, The Panasonics G1, FZ28 and the LZ7. For some time I shot with the Canon 30D and a couple older Nikon DSLRs. Other than using my DSLRs for work purposes, I would usually leave those cameras at home as they were too much to carry around and I was also concerned with theft.
But there are still those people out there, who have this belief that if their images aren't captured with a dslr, than the image is sub-standard and that somehow it doesn't measure up to a "real" dslr photo. But few people who bring their cameras wherever they go are carrying DSLRs and for good reason.
So why does a dslr user eventually jump on the P&S bandwagon? I think it's for different reasons...convenience, bulk, fear of theft, but most of all, missed opportunities. How often have we said "I wish I'd brought my camera" after missing of one life's special moments. When you think about it, when you see someone with a dslr, they tend to be on the lookout for pictures, and that's fine as I've done done it myself.
But with a P&S, you tend to be prepared for moments that come to YOU, and have the ability (and the camera) to nail those moments when they do. Hence the ability to "pull out and shoot" that shot you would have previously missed out on because your "pro gear" was sitting at home.
Taken with Sony H2
Now, I'm not saying you can replace the dslr altogether (at least not yet:)), nor am I implying you can get the same image quality with a razor thin compact. But if you take a close look at the available cameras on the market, whether you choose something new or used, it's likely there's a camera that will suit your needs. And remember, a little bit of processing can go a long way to punch up that image.
Below are random images I've taken with varying point and shoot cameras. Although I've also been a dslr user, I've always carried and appreciated the role the point and shoot can play for the photographer, as the fun factor and always being prepared means we capture life without having to watch it pass us by.