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Reduce shake, increase depth of field
Some compact digital cameras set a higher ISO automatically as part of their anti-shake program, but many do not.
In many cases this will provide the unbeatable combination of a fast, hand-holdable, shake-effect-minimizing shutter speed and an aperture that's at or near the optimum.
What about setting an even higher ISO such as 1600 or 3200? While some cameras perform reasonably well at ISO settings in the 1000-1600 range, there is some loss in image quality at the highest ISO settings--digital grain. This is especially the case with compact cameras.
Before shooting any important pictures at an ISO above 400 or 640, take a few test shots at the 800, 1000, 1250, and 1600 settings with your camera, and make enlargements or carefully examine the images on your computer screen.
Only you can decide at which point the benefits of setting a higher ISO are outweighed by the overall loss of image quality at higher ISO settings.
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