I have bought a new waterproof camera every year or 2. Now I have a camera I think I can keep, it is so good. In the past, these underwater cameras took photos that did not compare with my Sony non-waterproof compact digital with a Zeiss lens.
I have owned an Olympus, then a Pentax Optio, but the best of the bunch is the one I have now. It is Panasonic Lumix DMC
TS2 that shoots even has HD 720 P Video. With a Leica lens it shoots sharp images and with my 16 gig card I have virtually unlimited video and photo capability. I think I can shoot over 10 hours of video or about 25,000 photos.
It has even has facial recognition and image stabilization. It has 3 underwater modes and comes with a free silicone skin that my other two cameras did not have. It takes great standard photos which the Olympus and Pentax did not. I think it is the Leica lens which is a German like the Zeiss lens in my Sony.
Check the review below of the current cameras. The newer Lumix
TS3 out scores all the cameras tested including the second place Sony which costs over $50 more. Hmm, can you say German lenses rock. It is now less than what I paid in 2009.
'Compact Waterproof' Camera Group Test (Q3 2011) Review: 4. Panasonic Lumic DMC-TS3: Digital Photography Review
'Compact Waterproof' Camera Group Test (Q3 2011) Review: 1. Introduction: Digital Photography Review
I'd get the Lumix without a thought.