Even though it only has a 2/3" sensor (smaller than Micro Four Thirds and APS-C), the Fujifilm X20 compact camera has the ability to soften backgrounds for portraits. Take a look at this comparison.
Fujifilm engineers created a clever Pro Focus mode (in the ADV menu) that captures two frames to create a softened background without compromising the image quality of the subject. I've tested it a handful of times, each time rendering excellent results.
There are three softening options, from mild to strong. You do have to compose on the LCD in ADV mode instead of the optical viewfinder. And the final capture is a JPEG -- RAW isn't available in this mode. But the compromises are worth the final output, for sure.
For professional work, large image sensors provide the most flexibility and best quality. No doubt. But you don't necessarily want to take your 5D Mark III with 70-200mm f/2.8 zoom on a date. For those occasions, it's fun to have a compact that can deliver artistic results.
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