I use the Panasonic LX3 for those days I dont fancy carrying the big camera around. When I bought it I came to the conclusion that it was the best thing available for my needs. The main selling point for me was the lens and its low f#, the option of full manual control and the RAW format. The drawback of the LX3 is the relatively short focal length range (max. 60mm) but as far as I know this has been addressed in the LX5. The alternative I considered was the Canon G10 (I think they are up to G12 now) which seems to be a good camera as well if slightly larger.
For a compact camera the pictures quality of the LX3 is very good but someone who is used to SLRs will always see the difference. The thing that bugs me most is the reduced dynamic range which often results in featureless skies and other scenes of slightly difficult conditions.
HTH
Nille