The reason that higher megapixels can "damage" your pictures is because of the noise that it creates. Noise are those little grain dots that you see on pictures. This can happen alot in low light. Though there are programs that can fix the problem such as photoshop and noise ninja.

Hope this helped!!!
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It has to do with the camera's on board computing power. In a nutshell, your camera can only manage the number of pixels that can be controlled by its internal computer. If you overload it with pixels it starts freaking out.
Source(s):
Olympus camera

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It's to do with the noise created by the extra pixels.

The tiny sensors on cheaper digital cameras are not big enough to pick up all the megapixel details - so all the unnecessary megapixels actually end up distorting the picture.

See this article:
http://www.majid.info/mylos/stories/2004/02/13/megapixel.html
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I don't want to just copy and paste, but read this article it will tell you scientifically why more pixels gives more noise when the sensor remains the same size. http://www.dxomark.com/index.php/eng/Insights/More-pixels-offsets-noise
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The overall sensor in most cameras is a specific size (to work with the lenses that are made for them.) So, to make cameras that have a higher mega-pixel count, the manufacturers are still making the sensor the same size (they have to so it will physically fit within their overall camera-body and lens design.) ..all they are doing is making the individual elements smaller.

So, each individual sensing-element (or pixel) on the sensor is smaller so they can fit more of them on the same-size sensor. The down-side of this is that, being smaller, less light is going to be hitting each element. And the less light, or fewer photons you have hitting an element, the less accurate an approximation you will get of the real-world picture in front of the camera.

It's basically a real-world example of a Monte-Carlo sample .. you make little 'buckets' to capture the light, but the smaller the sample you take, the less-accurate the results.

So, in the end, you either have to get more light onto what you're trying to photograph, or get a camera with a bigger sensor (a less-compact camera, or an SLR) or you have to leave the shutter open longer to capture more light. (And, leave the shutter open for longer, you will get blurring from moving things.)

I had that slow-shutter problem with my girlfriends super-compact camera .. it's a thin camera with the sensor mounted at 90 degrees to the lens so it can still zoom. But to fit in the body, the overall sensor was very small, making for very small individual pixel-elements. In the end I decided I'd much rather have a bigger camera that was a bit more responsive.
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I have read all of the answers up to this one. Some of them are enlightening but the fact remains that digital cameras do not add noise by generating more light-points or pixels.

A digital capture device reads micropoints of light cast on it through a lens. Each pixel sensor reads the amount of light and creates a numeric value, normally from 0 (black) to 7 (white).

Any reduction in quality from pictures taken with a digital camera are not from the camera but after the digital file leaves the camera and is output to a device (printed) or viewed on a computer screen. A process called interpolation takes place, just like when you use PhotoShop to change the resolution of an image. In this process, pixels are moved apart and new pixels inserted between them based on the values of the original pixels, when adding resolution. Or, as is the case when printing a high resolution image or viewing it on screen, there are too many pixels for the device and interpolation works in reverse: Pixels are grouped into a matrix of 4 x 4 and replaced with a sub-set of their "average" value based on their actual value.

Thats why too high of resolution looks softer or muddy when printing because the printer can not handle all the data and it is adjusted to fit your needs. I'll bet you'll see better quality from any picture if it gets printed with a dye-sublimination printer or any extremely high rez output device.
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