Kryptos18:What exactly are point-and-shoot and DSLR cameras, what is the difference hardware-wise, and what can I expect in the realm of photo clarity?
Point-and-shoot cameras are the all-in-one cameras that you find selling from $100 to around $500 these days. They have a single, fixed (not interchangeable) lens, an LCD screen for composing the image (a few have a separate optical viewfinder as well), and are geared toward automated use, although most of them also allow some degree of manual exposure control. Most of the controls are presented on the LCD screen, with only a few buttons available for manipulating the settings. Point-and-shoots also have no mechanical shutter, which makes them slower to capture the image when you push the button, and the maximum shutter speeds top out at 1/2000 of a second on most models.
DSLR (Digital Single Lens Reflex) cameras are larger, have interchangeable lenses, and can cost anywhere from $400 to $900 for a consumer-level model. $1500 to $2500 for enthusiast/semi-pro models, and up to $8000 for professional models. All DSLR's have mechanical shutters and will capture the image immediately when the shutter is pressed. The higher-end DSLR's have shutter speeds up to 1/8000 of a second. The controls vary with the models as well. The lower-end DSLRs cameras are geared primarily for automatic use, with most of the controls presented on the LCD screen. The higher-end models have many more switches, dials, and buttons allowing for more efficient manual adjustments to the exposure settings (useful if you need to adjust things on the fly).
Kryptos18: And finally, how much would I be looking to spend to get quality bird pictures?
I'll answer this one second, as it feeds into the other question. Quality is a very relative term, and your own perception of quality will likely vary as you gain experience in photography. In my case, the images I took three years ago and thought were great are now only so-so 
In all likelihood, if you went and spent $300 on a decent P&S camera, you'd be pretty happy with the quality. If you used it a lot, did some reading in a few photography how-to books, and gained some field experience, you'd probably start running into the limitations of P&S cameras. Primarily, these limitations are the slow shutter response time and the lesser optical resolution.
By "optical resolution," I mean the sharpness of the image the lens can create, not the digital resolution (number of megapixels captured by the image sensor, which are close to equivalent between both kinds of cameras, except for the more expensive DSLR's). All DSLR cameras have larger lenses than P&S cameras, which allows them to gather more light (more photons). More photons mean sharper images. Whether the photographer has the skill to capture the optimal image is another story, but in general, with a quality lens in place, every DSLR has the potential to create sharper images than any P&S camera. The trick for the DSLR photographer is to assess the lighting conditions and the subject, and then get all the settings right so the lens forms the best image it can, and the shutter lets that image pass from the focal plane, through the sensor, and onto the memory card. The automatic settings on both kinds of cameras do a pretty good job most of the time, but the more experienced photographers know when and how to help them along with a few manual tweaks.
Kryptos18:
This really depends on how serious a photographer you want to be. I won't lie. DSLR's cost a lot more than the initial price you pay for them. First, you get your camera body, and one or two "kit" lenses. The kit lenses are the cheapest lenses that the manufacturer makes. A Nikon D5000 kit runs about $1000 with an 18-55mm and a 55-200mm lens. The lenses by themselves cost about $150 each. For comparison, the last two lenses I bought cost $400 and $450, and these are considered cheap lenses. I recently rented a lens that cost me $280 for the week, plus shipping and insurance. It's $5000 to buy, and I'm seriously considering buying one, simply because I got the best shots of my life while I was renting that big high-end lens for a week.
Now, no one is forcing me to buy these things, and there's no obligation to do so. The kit lenses will last a long time. The problem is as I go on more and more outings, I keep running into the limitations of my gear, and it starts to become worth it to invest in the higher quality stuff.
On the other hand, you could just go out and buy that $300 P&S that the reviews say is the best one available this year.
If you're still undecided, here are a few points that might help:
- DSLR's are big and bulky, P&S cameras can slip into a pocket. Are you willing to sacrifice some potential quality for a camera that's easy to carry?
- DSLR's are more expensive at the outset, and can cost even more as lenses, filters, and accessories are added
- P&S cameras are as good as they'll ever be when you buy them. DSLR's can accept more capable (and more expensive) lenses as your skill increases.
- P&S cameras are cheap, and you can always buy a new one when they get better
- You can buy a new DSLR camera body for the latest features, and still keep using your existing lenses (some lenses cost far more than the camera body does!)
- DSLR cameras can shoot from 4-9 frames per second, P&S cameras can typically only manage 1 or 2
- DSLR cameras fire the shutter instantly, even the best P&S cameras have a slight delay (not good for jumpy little birds)
- The newest DSLR models have live LCD viewfinder and video capture (no longer a feature discrepancy here)
- DSLR cameras can control powerful external flash units (more useful in wildlife photography than you might think), only a handful of P&S cameras can do this
I can't just come out and say which one you should buy. It really comes down to how much you want to spend, which is closely related to how much time you'll spend with photography. I've tried to give you enough info to start the decision process.
Please feel free to ask if you have any more questions, and I'll answer as best as I can. I'm sure others will contribute their own opinions, too.
