Without going into too many technical details, the number of Megapixels (MP) a camera has, the higher the quality of the image will be.
This in turn will determine how large a print you can make before the print image starts to deteriorate.
Here is a simple guide to decide what is right for you.

• Two MP or less.
  This is typical of earlier digital cameras, many mobile phones or PDA's.
  Clearly, you cannot expect too much and I would not recommend this size for prints but you can get some passable results with small prints if you are not too fussy.
  On the other hand, this would be perfectly all right if you were mainly into emailing pictures or posting them on the web.
  
• Three MP This size is probably the best choice for the casual photographer being a good compromise between price and quality.
  You can expect to get good quality 6 x 4 in prints and reasonable 7 x 5 in prints even a fair 8 x 10 in.
  
• Four MP This is the point at which you can really expect good quality images and very decent quality prints up to 8 x 10 in.
  This size will meet the needs of the great bulk of photographers for almost all types of shots from family portraits to holiday shots and landscapes.
  Recommended for photographers to give good quality results for most normal purposes.
  
• Five MP This will give even higher quality images and nice prints up around 11 x 14 in.
  So, if you are into large prints, this size will do you nicely.
  This is also the minimum size that you can start to expect to sell your images to commercial outlets.
  
• Six MP This is where the quality really starts to kick in.
  You should be able to get quite high quality 11 x 14 in prints and possibly higher sizes.
  Ideal for framing or marketing to commercial outlets.
  
• Over Six MP This is where the professional level starts.
  You will get outstanding results but at a price.
  Before you opt for this option, ask yourself if the price is justified for the purposes you will be using it for.
  

This category includes, high-end compacts, digital SLR style cameras and, of course, the full-blown high specification pure digital SLR models (DSLR).
You would only use this specification of camera if you were into semi or full professional work or if you are a serious amateur.
If you are into sports or wildlife photography then you would be better off buying a DSLR as they offer a range of (even more expensive) interchangeable lenses that would be necessary for these purposes.
So there you have it.
Choose the MP value to suit your purposes.
It would be over expensive to buy a 6/7 MP camera if all you are going to use it for is family, holiday and general shots - a four or five MP camera would be quite adequate and give you prints around 8 x 10 with no problem.
On the other hand, if you want really high quality results for selling your images, a six MP camera would be a better choice.
For professional or special photography, you may need a camera with a higher MP value.
A word of warning here! Whatever camera you are tempted to buy, make sure it has a reasonable optical zoom facility as opposed to a digital zoom.
I would recommend at least a three times optical zoom.
Do not be mislead by figures quoted for the digital zoom value for a camera.
An optical zoom magnifies the subject with no loss of quality; a digital zoom in effect "magnifies" all the pixels and can significantly reduce the quality.
This has the effect of lowering the effective MP value.
Happy shooting