A digital camera system in which capture, processing and storage functions are partitioned differently than in existing systems. A hand-held digital camera is used with a workstation that may exist in a commercial image processing service center. A minimal amount of image data processing is performed in the digital camera, thereby allowing significant digital camera cost reductions due to lower memory requirements, lower processing requirements, and lower power requirements. Real-time single pass image compression techniques are employed within this digital camera to permit rapid gathering and storage of raw or minimally processed image data. The workstation to which the image data are transferred performs the image processing normally done within existing cameras. This processing takes advantage of the increased computational power that is possible to have in such a workstation, compared to that of a small camera, and the increased time over which such processing may be performed.