Image Quality
Unfortunately, the image is very small. The "high resolution" setting is onlu 352 x 288 pixels, barely large enough for a web image. In low light (indoor light) you get horizontal lines accross the images.

Software
Another complaint is that the camera forces you to use Availasoft software to download the pictures from the camera. Like most cheap software packages, it tries to install other programs on your machine like a photo album. On the bright side, the software (called MyCam CIF) allows you to control the camera directly from the software. This allows you to preview what the camera sees on screen. You can capture a frame, and even shoot in video mode this way.

Interface
Since you don't have a screen to view the images on, you are really shooting blind. There is a tiny screen that shows two letters that you use to figure out what you are doing. The abbreviations aren't very intuitive, and unless you carry around the handbook or have a great memory, you don't know what they stand for. For example, CA means delete all images. To make matters worse, sometimes it doesn't even dislplay letters. For self timer mode, it uses an "S" and a letter that is a capital E without the top bar. Confusing to say the least.

Viewfinder
Probably the biggest disappointment of this camera was the viewfinder. In trying to get an image to accompany this review, I had to take many photos of the same subject matter because, what I was seeing through the viewfinder wasn't what got photographed. It was so off that I would have swore the camera wasn't even pointing in the right direction. Here is a sample image from Philips Keychain Digital Camera:

In conclusion, this camera gets a thumbs down from me. Maybe I am being a little hard on a camera that is just meant to fit on your keychain, but the image quality and serious usability flaws make it not worth the trouble. The only way I could see this camera having any value is when it is plugged into a computer. It could be a treasure for anyone interested in making low quality video.

UPDATE:
Due to the inferior nature of this product, there are lots of people that are frustrated with it. This post is one of the few places online that talk about this camera, so consequently it is towards the top of the Google results. If you found this entry by a Google search looking for support, I can't help you. My advice is to buy a better camera. However, there are several kind people that have left comments here offering help. Please read all the comments for more support oriented questions. Sorry I can't be more help than that, and I wish you luck if you are trying to make this piece of junk work...