In 1972, not long after becoming the first actor to be anointed a British lord, Laurence Olivier made his one and only televised product endorsement. The commercial was for the Polaroid SX-70, the camera now seen as a landmark in photographic engineering and design. Despite a hefty list price that would be the equivalent of $835 today, the press and the public couldn't get enough of this miraculous SLR that folded flat and produced instant photos. By the following year, Polaroid was churning out 5,000 of these iconic gadgets every day.

Forty years on and Polaroid's precarious hope for survival now rests on the glam-kitsch shoulders of its creative director, Lady Gaga. She has the task of rekindling that old magic in an age when cameras are no longer the planet's primary source of quick-gratification photos. Mobile phones are. And if that weren't challenging enough, an entirely new camera concept has since come along that threatens to suck the air out of the point-and-shoot camera market with all the revolutionary force of a James Dyson vacuum cleaner. It's called the Lytro and it's been dazzling the media already.

Developed and marketed by a Silicon Valley start-up that bears the Lytro name, the novelty of this $399 device will become apparent the moment it starts rolling out in the new year. It more closely resembles a kid's kaleidoscope than anything we might think of as a camera. But it is the technology inside the Lytro's sleek rectangular tube that is the true marvel. Rather than capture a single flat image of a particular scene, the Lytro uses a 'plenoptic' array of micro-lenses to capture the colour, intensity and vector direction of available light rays - all 11 million of them, which are then processed using software called the Light Field Engine.

For the happy snapper, what this means in practice is that Lytro users no longer have to focus on a particular subject and adjust the camera dials accordingly. They just press the one button and decide later what it is about any given picture they want the eyes to zero in on. Anyone viewing a Lytro image can keep refocusing and exploring the same scenes from different vantage points ad infinitum. "Many have described this as the next evolution of photography," says Charles Chi, the executive chairman of Lytro, who seeded the company with an initial $250,000 when he was general partner at venture-capital powerhouse Greylock in 2008. The company has since raised almost $50m from a collection of VC heavyweights led by Andreessen Horowitz. "Traditional cameras, going back to film cameras, capture a two-dimensional picture. They don't capture the light field, which is a very important concept in science. The light field defines the scene as a set of multidimensional light rays. This is the basis for modern computer graphics and computer vision. By capturing the light field, many new capabilities are enabled that have never before been experienced."

Light-field technology is not particularly new. But until Malaysian-born computer scientist Ren Ng wrote his dissertation at California's Stanford University, the act of capturing such a wealth of visual data required hundreds of cameras, all of them attached to high-powered computers.

Ng, who is now Lytro's CEO, figured out a way to put all of that computational photography into the palm of one's hand. He compares his breakthrough to a recording studio that can capture every musician on a separate track that can then be constantly and independently adjusted for volume and sound effects.

According to Chi, the ability to "post-focus" is just one of Lytro's potential bag of tricks. Video is on the company's roadmap, as is a groundbreaking 3D effect that can be produced by Lytro's one lens - as opposed to the two lenses necessitated by traditional 3D cameras. "The Lytro camera intrinsically captures 3D images," notes

Chi, "since the light field itself is a multidimensional set of data that represents the scene. From the light field that is captured, photographers can create 3D stereo images that we are familiar with. Lytro cameras actually go beyond 3D stereo images. Lytro pictures can demonstrate a 'parallax' or 'hologram' effect. This is not possible from any other kind of camera. Light-field imaging has tremendous potential and what we have done to date is just the starting point."

In the race to become the first company to commercialise a plenoptic camera, Lytro has made some bold business decisions. One was a self-consciously hip design that Chi insists was dictated not so much by Lytro's technology but by the desire to be seen as "attractive, very functional, easy to use and exciting for early adopters". Another was the decision to shun a partnership with any of the big players in the field - Nikon, Canon, Sony - and instead steer its own path through the ferocious consumer electronics marketplace. "Our ideas are the result of looking at photography in a very different way than the incumbent manufacturers," explains Chi. "Some ideas probably required a start-up environment for their innovation to be born."

That Silicon Valley mentality may end up being a major strategic asset. Rather than try to change the habits of an entrenched market of photo enthusiasts, Lytro is free to chase after the more open-minded millennial crowd in the areas that matter most to them. Right now, for example, Facebook can natively support Lytro's light-field picture embed codes within its browser. Just as with YouTube videos, Facebook users will be able to share a player version of their Lytro pictures (hosted on Lytro.com) that show up in their Facebook stream. And yes, they remain interactive living pictures on Facebook, so people can continue to play with them. The associated wow-factor will ensure a social-media chain reaction that will be hard to beat.

Whether Lytro manages to become a household name or not, it must be careful to avoid Polaroid's own missteps. Even though sales of the SX-70 grew at a rate of 20% a year, the enormous expense of research, manufacturing and marketing proved its eventual undoing. By July 1974, just 26 months after the SX-70 was introduced, Polaroid stock had plummeted from $149 to $14 on investor fears. It was a second act that not even Lord Olivier could rescue - although M'Lady Gaga might still pull out a final-curtain surprise of her own.

Then there's the story of Pure Digital, whose one-button Flip video camcorder achieved rapid popularity and a $590m sale to Cisco in 2009, only to be shut down this year after losing traction to the iPhone and other video-capable smartphones.

"For lessons learned, we try to learn from many companies," says Chi. "First, ease of use is very critical to broad adoption. Second, long-term differentiation is necessary to create an independent business. Third, create products that are fun to use, offer meaningful benefits and can create lifelong fans. Fourth, creating products is not easy: we have to work hard and be continually innovating."

Of course, should the commercial picture become grainy, there is nothing to prevent Lytro from entertaining the deep pockets of a major player down the road. Chi says the Lytro technology can be applied to any image-capture device "from endoscopes to smartphones and giant telescopes". Precisely the kind of eye-catching technology that might make an Apple or a Google sit up and focus.

The phoney war

Social media's narcissism has ensured that photography is no longer reserved for holidays and family gatherings. It's part of our daily fabric, thanks largely to mobile phones. Right now, Apple's iPhone 4 is the most popular 'camera' on photo-sharing site Flickr, a dynamic that has created a bonanza for developers of mobile editing and photo-effects apps. (The new iPhone 4S is already in second place.) Load Hipstamatic on your phone and you don't have to be a Cartier-Bresson to turn your surroundings into works of art.

Camera-makers have responded to this shift in one of two ways. Recognising the demand for both portability and something that goes beyond the simple point-and-shoot, the big guns have all been rushing to miniaturise their SLRs into a something more pocket-sized. Since picture quality is directly related to sensor size, this has involved some remarkable feats of software engineering.

The alternative is to create add-ons for the smartphones themselves. This past year has seen dozens of inexpensive attachments being rolled out by niche manufacturers such as Olloclip, Photojojo and Pixeet that convert phones into semi-professional cameras. Everything from fisheye lenses to telephoto lenses can now be snapped on to the back of smartphones, all of them extremely simple to use.

Smartphone photography is growing so fast that it has not only spawned its own category - iPhoneography - but also its own conference. Hundreds flocked to San Francisco for the inaugural '1197' event, named after the date the first cameraphone picture was taken, on 11 June, 1997. It has taken less than 15 years to upend a business that has been around for more than 150.