Digital cameras come with two types of zoom, digital and optical.Digital zoom somehow is not very useful in sense, that it degrades the image quality big time, whereas, optical zooms help a lot as they magnify using the focal lengths of lens present in camera. So while choosing a camera for you try to get highlighted on the optical zoom capabilities of camera.

Basically, in case of Optical zoom. zoom-in is achieved by changing the position of lenses, like in binoculars, whereas Digital zoom is accomplished by cropping an image down to a centered area with the same aspect ratio as the original, and usually also interpolating the result back up to the pixel dimensions of the original.

Digital zoom is achived through programming I think. It extends the optical zoom but its not very clear when compared to optical zoom. Your images will loose lot of information and it will be very hazy.

I think Manav will be able to help you more on this. Let me ask him to answer this thread.

What is the difference between Digital and Optical zoom, have heard that Digital Zoom is not very useful, is it true?