The differences between optical and digital zoom are simple and very important to understand. The choice you make will end up having a very noticeable impact on the final quality of your photos or videos.
Optical zoom is a form of image magnification that is attained by altering the focal length of the actual camera optics. For example, imagine that you were shooting with a DSLR camera and a lens with a 70-300mm focal length. If you were to zoom in from 70mm to 300mm, you would be gaining optical zoom. Optical zoom does not utilize the processor or internal circuitry of the camera to zoom, only the optics you have mounted on the camera.
Point and shoot cameras will often advertise a 10x or larger optical zoom. This is the same principle as the DSLR using a 70-300mm lens, but on a smaller scale. The zoom you gain here will be through the optics of the lens mounted on the camera.
Digital zoom uses the camera's processor to magnify an image artificially. This is similar to viewing the finished images on your home computer and zooming in on them using your photo-viewing program. Digital zoom is often used as a supplement to the optical zoom range of point and shoot cameras.
When a camera zooms digitally, it is taking an area of the image and magnifying the pixels to make the image seem closer. This does not "generate" more pixels within the image, but rather makes the existing pixels larger. As a result, fine definition is lost in the image and the final result is often grainy and unsatisfying.
Optical vs. Digital Zoom
Generally speaking, digital zoom is not recommended if you are interested in getting the highest quality image possible. Salespeople at electronics stores will sometimes quote the digital zoom of a camera or camcorder as some sort of special feature that you should be excited about. They hit you with zoom numbers of 500x and beginning photography enthusiasts often believe that this is something they should be considering. The truth is that digital zoom can be accomplished using any basic photo editing software, and often with better results than found with the on-camera digital zoom.
Digital zoom always leaves you with a lower quality image than optical zoom. The more you zoom, the lower the quality of your images becomes. Small amounts of digital zoom may be negligible for hobby photography that is not intended to be printed as a keepsake. However, digital zoom should not be used if you expect to get a quality photograph.
Make the Right Choice
For some people, the quality you lose when using digital zoom may not be an issue. Some hobbyists see the loss of quality as the price they pay for not having to lug around heavy lenses on more advanced cameras to get far-away shots. There are many ways to look at this, and everyone approaches photography with their own personal goals. However, on a strict image quality basis, optical zoom will always provide a higher quality zoomed image than digital zoom will.