Taking pictures underwater is just plain cool, however the equipment to do it has never been cheap – or is it?
For the longest time, the only way to take an underwater photo on a budget was either to separately purchase an enclosure for underwater use custom fit to your cam that cost more than the cam itself, or do the old seal-in-transparent-bag thing and hope the lens would ‘understand’ it was shooting through a bag.
Fortunately those days are over as there is a digital camera available that’s point-and-shoot, cheap and is completely submersible up to 10 feet, the Kodak C123:

This cam has 12 megapixels so it can get the big 4000×3000 shots, and also has a 5x optical zoom which isn’t bad at all. The internal memory is awful at only 32MB, so the purchase of an SD storage card is required. It can shoot video at 640×480 30fps, and I’m assuming the dots under the lens are a microphone – but don’t quote me on that.
The C123 does run on two plain AA batteries, so you don’t have to worry about proprietary battery crapola.
The best part is the price: Only $70 on Newegg.
If you plan on hitting the water this summer, pick one of these up even if you already have a camera, because heck, an underwater cam for 70 bucks? That’s pretty awesome.

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No reviews on this one yet, but all the other cheap point and shoot underwater camera reviews aren’t too promising. Maybe this one is different….maybe not.
Very cheap, so the proof of the pudding will doubtless be in the eating. Ken Rockwell on his brilliant photo site recommends Canon D10 IS, which goes for more than triple the Kodak price.