ItsReallyDarren
That's really me
You hit the nail on the head there. Compacts are facing competition from cell phones with cameras. The small compacts are losing their edge in convenience so they have to offer something else. This offering from Nikon could offer a little step up over current compact point and shoots.
It's aimed at the average family photographer who wants a nice camera and thinks a DSLR is too large. Compared to the little compact they've been using for the last five years, the image quality should be a big leap forward.
Never mind that it will be a huge leap downward from a basic DSLR, the virtues of the smaller sensor will be seen as a benefit - more in focus shots, longer battery life, etc.
Unfortunately it seems to offer nothing for most experienced photographers.