How your camera detects color

The CCD (charged coupled device) is the light sensitive part of your digital camera. Like black and white film, the response of each element in the CCD depends only on how much light energy strikes that element. Thus, a bare CCD would only produce black and white images. To detect color, a patterned filter is placed in front of the CCD, which only allows red, green, or blue light to pass. Thus, each element in the CCD becomes sensitive to one of three colors. The final color for each pixel is determined by blending the response of each of the nearest CCD elements for each color, though exactly how this is done depends on your camera. There are two unavoidable downsides to all this: your images are made more blurry because each pixel is based on the response of multiple CCD elements, and because of the filter in front of the CCD, you don't detect all the light that hits the CCD (that is, your image is made more noisy in low-light situations).

For more info on this process, take a look at this page.

Kodak has designed a new color filter which tries to address the low-light problem, by sacrificing color resolution.