Watch out Canon and Nikon, your world of dSLR dominance is under threat.

The incredible popularity of the Micro Four Thirds camera system has resulted in it accounting for an unprecedented 16.5% of all sales of interchangeable lens cameras (ie. including the bigger, heavier, noisier dSLRs) – and all this in really less than 12 months of availability (if you exclude the original Panasonic G1).

The Panasonic GF1 is now the 4th most popular interchangeable lens camera, while the Olympus E-P2 sits in ninth place.

Just wait till the cheaper Olympus E-PL1 hits the shelves this month, and the potentially mind-blowing silent Panasonic GH-2 is released late this year, not to mention the expected fall in prices as these cameras will become cheaper to make with increased economies of scale and their relative lack of moving parts.

Furthermore, the release of some very affordable but high image quality lenses from Olympus – their 14-150mm lens is rumoured to sell at $US199 – and this surge in sales is only going to drive Olympus, Panasonic and third parties to a more rapid R&D timeline as they can justify the resources from the system sales.

A win-win for all Micro Four Thirds users – sorry Canon and Nikon – your entry level dSLR market is about to be cannibalized – fewer and fewer people will be wanting that style of camera for their travel, work, family events or just to take with them for sheer creative fun – because that is what Micro Four Thirds system brings back to the photography world – fun!

Of course, its popularity is not a surprise – the market has been demanding a high image quality digital compact system for years and the need has been unmet until now, and the Micro Four Thirds is the perfect sensor size to give the best compromise in image quality vs lens size vs versatility in range of legacy lenses able to be used – a much better compromise than the APS-C mirror-less cameras coming onto the market.

See dpreview report.

Olympus has also just announced that it is aiming to increase its current 5% market share in global high end digital cameras sales to 20% in the near future courtesy of the surge in demand for Micro Four Thirds cameras.

Olympus holds 70% market share of the medical endoscopy market, but prior to Micro Four Thirds, it has struggled to compete with Canon, Nikon and Sony in the dSLR stakes given the embedded virtual historic duopoly of Canon and Nikon.

But now with this “killer app” similar to the Apple iPod in being portable, take anywhere but have high functionality, the Micro Four Thirds popularity can be expected to grow exponentially as new technologies can be embedded which cannot be readily be used in legacy mirror-based dSLR models.