The latest smartphones from HTC and Samsung, and to a lesser degree the iPhone 4S, show just how far smartphone cameras have come in a short space of time. The quality of output is now so good that you would be hard pressed to know if the photos have been taken with a smartphone or a compact camera, and this is just one problem facing compact cameras.
The fact that they find it difficult to connect easily to desktops and laptops is another. They cannot easily share with social networks and they are not very portable. And the list goes on and on.
Now that smartphone cameras offer results that are comparable to compacts, the final nail in the coffin may not be too far away. Auntie Joyce will always use a compact camera, but when she dies she will leave generations of people who have been brought up on smartphone cameras. Sorry to say, but phone cameras and DSLRs (and above) are the only picture-takers I can see with a long term future.