The Four Thirds system has some small cameras, like the Olympus E-510, but there physical limits constrain how small you can make an SLR. There needs to be room for the reflex mirror, and lenses are designed to be a set distance away from the imaging substrate (i.e. film or sensor). The new Micro Four Thirds system is designed to address both of these problems, by defining a reduced gap between the sensor and the lens and by removing the reflex mirror entirely. This obviously means that optical through-the-lens viewfinders are out, and electronic live-view displays are in. Disappointingly, while the Four Thirds specification was openly available, the Micro Four Thirds specification—while similar—is being held tightly by Olympus, Panasonic, and licensees.
The DMC-G1 looks like a miniature SLR (perhaps learning from the confusion from users who saw Olympus E-300's body?), but the electronic viewfinder provides some interesting ways for the DMC-G1 to innovate. Perhaps the most useful is the live-histogram which means you can adjust exposure before the shot and without requiring additional light meters. At $670, it is competitively priced with its feature set compared to the entry-level digital SLRs where the current dearth of micro-four-thirds lenses are least likely to negatively impact sales. Its light weight (400g) and small size (especially depth) will also be attractive to consumers scared-off by the bulk of digital SLRs.