Okay, here’s the situation. The Nokia Lumia 1020 has a 41 megapixel camera (38MP for 4:3, 34MP for 16:9). It has six Carl Zeiss lenses and supposedly produces fantastic photographs – if you print them 4 feet wide by 3 feet tall. When it comes to megapixels, 41 is possibly too much for the average user. Unless you want to zoom in lots, or get great detail in macro photographs. In reality 12 megapixels is probably enough. Want a bigger image? Take a bunch of images and stitch them together. So double the megapixels means double the image quality right? Not so. Case in point, any series of progressive cameras, like the Olympus E-series.
Olympus E-1 = 2560 × 1920 = 4,915,200 (5MP)
Olympus E-3 = 3648 × 2736 = 9,980,928 (10MP)
Olympus E-5 = 4032 x 3024 = 12,192,768 (12.2MP)
From the E-1 to the E-3 there is only a 42% increase in the width dimension of the image, not the doubling suggested by the megapixels. Increasing a 5MP image to twice its linear dimensions would require a quadrupling of the megapixels – i.e. to double the resolution of a 12MP image would require a 50MP sensor.
Sensor sizes really don’t changed much, but as the amount of pixels increase, the size of the pixels get smaller. Smaller pixels mean less ability to absorb light, and reduced sensitivity. The sensor on the Olympus E-5 is 18×13.5mm, with an imaging area of 17.3x13mm (225mm^2). That means approximately 54,190 pixels per mm^2 and a pixel size of approximately 4.3µm. The Lumia 1020 has a pixel size of 1.1µm (micrometer), which is compensated for by the shear amount of pixels, and the form of sensor. More digital photography tutorials here.
More pixels does not always mean a better image. More megapixels means increased file sizes, increased processing time, apps that take longer to run. The question you really have to ask yourself is, are you really going to take a 38MP photograph of the plate of food you’re eating at a restaurant?