Ars Technica has an interesting article on why bumping up the megapixels on a mobile phones camera is not making any substantial improvements to image quality.
"Megapixels are the digital camera market's equivalent of horsepower and megahertz—a single metric that consumers and marketers latch on to tenaciously, despite the fact that it hardly describes overall performance. Over the last several years, camera manufacturers have been pumping up the megapixels on each successive camera model, regardless of whether such increases offered any real benefit (hint: it usually doesn't)."Although you will notice a big difference between a 3 megapixel camera phone and a 8 megapixel one, it is claimed that 12 megapixels is the most we will need.
There are several factors which combine to make a good camera; the quality of the lens is crucial along with things like having a decent flash and also sophisticated post image processing.
Although the article quotes a guy from Olympus Imaging's SLR planning department who may feel threatened by the rapid rise in camera phones, I do feel he has a point. We may soon see phone manufactureres putting less emphasis on megapixels but more on other aspects which will continue the improvements in image quality.
Read the full article at Ars Technica.