The Nikon D40 is Nikon's new entry-level camera, selling body-only at $600, undercutting Canon's EOS 400D by $200. The obvious question, is what does the D40 sacrifice with this $200?
Looking at the spec sheet, the D40 has a lower resolution, 6MP sensor. Most buyers won't notice this other than because they can store more exposures on their SD cards. It also loses the top status LCD that most mid-level and higher cameras have, relying instead on the rear preview LCD. For those familiar with Nikon, the biggest difference will be how the D40 interacts with existing lenses.
The D40 only has the ability to auto-focus Nikon lenses that have internal motors. If you have a collection of older, non AF-S/AF-I lenses, you will need to stick with the more expensive bodies that retain the mechanical focus-drive support.