The EOS-M - for two reasons - superior IQ, and even more because it has a real user interface. It's an EOS - you can pull it out of the box and be familiar with 99% of it's functions without reading the manual. After years of digging through insanely crappy menu systems (Sony and Panasonic ), and looking for advanced features (1/60-1/200s flash sync) that didn't exist (Canon compacts), it's perfect.
You can quibble about a million things with it (all compacts suck in one way or another), but it's cheap right now and for Canon users, it's just like picking up your SLR.
+ 1,000 For me too, Dear CarlTN and mackguyver.
After I have 1 week, I fell in love with this Tiny EOS-M----Yes, Now I can do with out 20D, 7D, 5D MK II, and 1DS,Yes--I can do 80% of the Big Brothers functions from EOS-M and plus I can put This EOS-M in my Jacket's Pocket too.
PS, Yes, I have Olympus FE 300, Canon SX 160 IS too, Both of them are great companion, before my new toy EOS-M come.
PS-2 = The Cheap Belt bag( from Office Max = $ 19 US Dollars) for 1 day trip