It seems a few people have decided to stop reading (or understanding) at the title. The sensor is 41 MP but the end result image is only 5 MP. Nokia's "PureView" tech is a bunch of algorithms which take the 41 MP image and use supersampling techniques to essentially take 8 pixels worth of data to make 1 final image pixel. So no, you can't use all 41 MP of resolution to spy on your neighbour's nipple hair(s). The enlarged sensor size also helps each pixel diode pick up more light which removes noise from light diffraction and allows each sensor to capture/absorb a decent amount of photons to make for decent low-light imaging. 

The specific algorithms may be different but what they're doing with all the data is the same thing that happens when you're watching a video on your computer and you resize the video player to make it smaller. The window is no longer large enough to display every pixel of video data in the file so the pixel data is being sampled to create a smaller image. This process seems to make the image seem sharper and (sometimes) make colors appear more vibrant. Same goes for pictures. If you have any digital pictures on your computer taken with a camera with more than 3 MP, you can try this. Shrink the window down in size and the picture will appear to get sharper. Finally to keep things gaming oriented, it's what is known as SuperSampling AA. 

I think it's a pretty neat solution. We're beginning to see a lot slower progression in some hardware fields in terms of raw capturing or processing capability and the industry continues to improve simply through ingenuity and creative ideas.

For more technical info check out Ars Technica's article on it.

Seems I missed a few paragraphs in my first read through. Nipple-hair voyeurs rejoice! Also I wasn't (and won't ever be) questioning your knowledge of imaging and displays. I know a thing or two but I'd hate to be on the opposite end of a discussion with you. I try to maintain my frail dignity as it is.

I agree. It's great to see these elegant and creative solutions rather than people simply brute forcing things like they've done in the past.

Aww man...have I really become the ogre no one wants to talk to around here? :)

Regarding camera phones, I agree with most people that megapixels are meaningless.

HTC has that 16 Megapixel HTC Titan II coming out which they were flashing at CES 2012. However I will bet any money that all they did is taken two 8 megapixel sensors and lined them up one after the other. That may give them slightly more image data but the gain over an 8 MP sensor will be completely lost to a naked eye.

This nokia technology however is the real deal. Now only if they can put it on a phone that people actually want to buy.

Lumia 900 has a 8 megapixel camera and even if it was 16 MP, it would not automatically 'blow away' the Iphone 4s's camera. It may be a 'little better' when its all said and done...

I personally can't wait to have a 4.3 inch or bigger windows phone that can be developer unlocked easily and has an SD card slot. I currently have a Samsung focus (dev unlock and SD card present, but 4 inch only) and HTC Titan which I just picked up (4.7 inch screen but no SD card and no dev unlock).

With Windows phone 8 supporting SD cards officially it looks like this is when I am going to find my perfect phone finally. If this phone happens to have a 41 megapixel camera and is made by Nokia, I won't be too upset. :)