Which camera is better?

For a beginner, I would lean more towards the Canon Rebel XS. The lens that comes with it has image stabilization, it has live view function, and more megapixels. Speaking from experience, I tried both Canon and Nikon DSLR's when I was first starting out and found that the controls on the Canon were easier to use, and the menu fuctions were easier as well. Go to Costco and try them both out, see what you think.

Over the D40 the Rebel XS has 10mp vs 6mp and the XS also has a built in auto focus motor, so it does not have to rely on the lens.

Both are excellent cameras for beginners, although most beginners start with a 35 mm SLR and learn how to use a fully adjustable camera by taking a few classes. Which is best for you, only you can decide. You are going to have to go into a camera store and hold both in your hands and see which feels the best to you. Then you need to see which has the easiest menu for you to navigate. In the end, you are buying a system, so the actual camera you buy is not as significant as the lenses you need, so picking the right system for your type and style of photography is the most important aspect to your choice. Lenses will last for decades, cameras are usually replaced by pros every 18-24 months and advanced amateurs every three to five years, not because the wear out, but because technology just advances so quickly and you will eventually need or want to upgrade. Most people buy the least expensive camera body and invest in a second lens. Links: http://www.kenrockwell.com/nikon/d40.htm http://www.kenrockwell.com/canon/rebel-xs.htm On megapixels: http://www.kenrockwell.com/tech/mpmyth.htm Eventually all but the specialized lenses made by Nikon will be the super fast focusing AF-S lenses (27 currently available, more to coming)