I've been shooting with a compact Canon SD1200IS for a few years now, and I'm pretty happy with it. It's incredibly pocketable, and capable of producing some nice images. It even survived being dropped in a puddle, though it is not waterproof.
The current equivalent would be the Canon ELPH 100 HS. Available at Walmart for $150 USD. It has a bunch of scene modes, and fun effects, but also allows you to take some manual control, by adjusting ISO, EV, and other controls.