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Most lenses used on a Digital SLR are designed for a 35mm film sensor. Therefore, if the digital senor in the camera is not the same size as 35mm film, a magnification and cropping of the image will occur in the camera.

Is this a good or bad side effect? Well the answer depends largely on the goal of your photography. Ideally we would like as many mega pixels as possible to be captured on the sensor. However, if you start the debate with a fixed number of mega pixels, then when using a large zoom, the multiplier effect is like getting a free percentage zoom without any real drawbacks. However, when you want to take a wide angle shot, it will require you to have a wider wide angle lens. This is not only more costly, but leads to distortion in the image.

Different cameras have different levels of multiplier effect. Probably, over time, this issue will disappear, but for now it is an important consideration. Currently the main multiplier effects are none for full frame cameras, 1.3 (Canon EOS 1D Mark IV), 1.5 most Nikon consumer grade cameras, 1.6 most Canon consumer grade cameras.

Observe the following images that demonstrate what a 1, 1.3, 1.5, and 1.6 multiplier will have on the same photo.

No Crop Factor
No Focal Length Multiplier Effect

30% Crop Factor
1.3 Focal Length Multiplier Effect

50% Crop Factor
1.5 Focal Length Multiplier Effect

60% Crop Factor
1.6 Multiplier Effect

Clearly, having a multiplier effect when trying to get a wide angle shot is a disadvantage.

However, observe below the benefit it can been when trying to zoom in on your subject matter.

No Focal Length Multiplier Effect

1.3 Focal Length Multiplier Effect

1.5 Focal Length Multiplier Effect

1.6 Multiplier Effect