It seems like the Foveon sensor should be able to produce better images, because it's not dependent on the separate red, green, and blue pixels as exist on most digital cameras. However, cameras equipped with Foveon sensors are pretty much nonexistant. Why?
(Side note: This question was inspired by Bayer Filter answer where the Bayer filter potentially caused problems...)
What happened is that Sigma bought Foveon and put a lot of pressure on them to produce a sensor that is actually capable of competing with standard DSLR sensors. Now that Sigma is building the whole camera and sensor, there is a lot more focus on producing a compelling end-product.
Last year Sigma announced the SD1 which uses an APS-C (1.5X crop) sensor with 15 million photosites. They way they count Sigma calls it a 46 megapixels sensor. They have not released many details to members of the press (me at least) but is expected to be available by this summer.
There are still several Sigma cameras (DP1x, DP2s, SD15) in production which use the 1.7X Foveon sensor with 4.5 million photosites (aka 14 megapixels).
It comes down to this: at least for most people, spatial resolution (especially in green range of colors) is much more important than color resolution, especially in the reds and blues. The color response curve I included in a previous answer gives at least some notion of the reason for this.
This is particularly relevant when the vast majority of pictures stored/displayed electronically are in JPEG or MPEG formats. These formats support down-sampling the chroma channels to half resolution anyway -- and (especially in the case of MPEG) that's how most pictures are stored. As such, converting data from a Foveon sensor to JPEG or MPEG format typically throws away quite a bit of the extra information you collected.
Though the benefit isn't necessarily huge, some Bayer-sensor cameras (e.g., the high-end Leaf/Phase One's) support sensor-shifting to take a series of four pictures (of a fixed subject) with the sensor shifted to different positions, so each pixel in the final picture has full color information (and still has twice as many bits for green as for red or blue, so it still fits reasonably well with normal vision).
Foveon sensors are great in theory, but in practice they aren't a compelling choice. They're generally much lower resolution and can only compete by counting the 3 sensors at each pixel position to be individual pixels.
Sigma still produces cameras with Foveon sensors: http://blog.sigmaphoto.com/2011/faqs-the-sigma-camera-and-its-foveon-x3-direct-image-sensor/
What happened to the Foveon sensor is that Sigma adopted the technology early on, but other camera companies were reluctant to do so.
That state continues to this day. Sigma continues to evolve cameras, currently offering an SD-15 DSLR, and the fixed-focal length large sensor compact cameras DP-1 and DP-2.
However recently Foveon technology seems to have been on the upswing. As another post mentioned, Sigma seems close to releasing a greatly improved Foveon sensor in the SD-1 with even better noise handling, and resolution that exceeds pretty much any consumer DSLR today (though not medium format systems). The new sensor is known to be roughly 46MP, which translated into Bayer equivalence means around 30MP of roughly equal detail to a Bayer image - that is to say, if you took the 15 million pixel output image from a RAW converted from an SD-1, and upsampled it to 30MP it would look identical to a 30MP bayer image. Only it would also lack color pattern issues a Bayer sensor might have, and have better falloff in detail. Foveon sensors have traditionally held a large dynamic range, and also very low noise at lower ISOs, but since the new sensor seems so different we need to wait to see what the characteristics are like going forward.
So what has changed for the better that allows for such advances? It' partly because we are seeing the result of steady R&D work at Foveon, but also because Sigma bought Foveon and have them focused now wholly on producing better large camera sensors. Before Foveon was trying to see what segment of the photographic market might make a good customer for the technology and as a result was a lot more scattered in goals.
Not only are the results of this focus seen in really significant resolution increases from the sensor over previous generations, but also that they technology was selected to go to Mars by the ESA:
Sorry for the rough translation, I cannot find a single other source for that news.
So basically what's happening for Foveon technology is that it's still evolving, just at what was seemingly a slower pace than other sensor technologies but what may end up being a leap ahead of them. We need to see what the new sensor can do to see where the state of Foveon technology really sits these days, so really this is probably a great question to review in three months time.
If you really want more information on just how it is a 15 million Foveon output image can contain as much more more detail than a 30 MP bayer output image, read this article comparing a 4.7MP Foveon sensor to a 12MP Bayer one (the Canon 5D):
http://www.ddisoftware.com/sd14-5d/
Especially note color chart resolution and ponder this interesting question - a 15MP bayer camera has only 3.75 million photosites detecting red. So if you put a traditional red filter like B&W photographers like to use, all the other sensors are blacked out and you are now shooting with a 3.75MP camera. Meanwhile a 46MP Foveon sensor with three layers of 15 million photosites detecting red/green/blue (roughly) does not care what filter you put in front of it, every pixel of output will hold data from 15 million different red sensors.
That might seem an arbitrary case, but what about tone shifts in something like a red car - or a blue sky.
For those REALLY wondering where Foveon is going at a technical level, read the latest patent from Foveon basically covering the fundamentals of what is probably the SD-1 sensor:
http://www.freepatentsonline.com/y2010/0155576.html
One last thing of note is that some form of the Foveon technology, even if not the Foveon design exactly does seem to be the future of imaging - patents have started to arrive from Sony and other companies also looking at ways to layer sensors.
There are two issues which have been problematic for Foveon sensors other than the problem of spatial resolution. These are both inherent to Foveon's key concept: using the spectral absorption of different depths of silicon to separate colors.
With a Bayer array, the different filters are created with dyes carefully selected to match the chosen red, green, and blue primaries. With Foveon, the distinction is entirely based on the physics of silicon, which isn't as neat a match as the marketing materials typically show. This results in the two problems.
First, the three primary colors recorded by Foveon sensors are further from the primary wavelengths that the human eye's cone cells respond to, and in fact the shape of the wavelength curve to which each depth responds is very different from that of our vision. That means the native color space of the device is a different, shifted shape from sRGB and other typical output color spaces — or from human vision. The sensor records "imaginary colors" — ones we can't really see — in some part of its color range, and other parts of the color range aren't covered perfectly. This doesn't show up as missing colors, but as a sort of color-blindness (the analogy there is actually quite good, since it's effectively the same problem), where colors which should be distinct are represented similarly.
Second, lower-frequency red light is absorbed at the deepest level, which unavoidably results in some attenuation — which means more noise in the red channel. As I understand it, noise reduction in Sigma cameras deals with this by blurring the red channel more strongly. I know that my Bayer-sensor camera exhibits, by a wide margin, more noise in the blue channel. I'm not sure if that's an inherent problem with Bayer or CMOS sensors, or if it's double problem on Foveon. (I made that its own question.)
None of this is to say that the widespread Bayer technology is perfect, or even absolutely better than Foveon. It's just that everything has its compromises, and Foveon actually turns out to have some tough ones. The big issues with Bayer (aliasing, color resolution) can be solved by throwing more pixels at the problem, given corresponding increases in noise handling. This has worked out very successfully so far, and of course it's no accident that it corresponds well to megapixel-based marketing.
Update (May 2011): Sigma has just announced the new "SD1" model, priced at around $9,700 — comparable in cost to something like the Pentax 645D medium-format camera, but with an APS-C sized sensor. It'll be interesting to see if they have, indeed, been able to address some of these issues. My speculation is that they probably have, but at the sort of cost that led them to change the target market. But even then, I'm not so sure — the maximum ISO is still 6400, which is two stops behind the current crop of Bayer sensors. (Remains to be seen, of course, if they simply decided on a more conservative limit. Without staring too much harder at the crystal ball, there's no way to tell; I'll update this again when the reviews are in, and if I'm very lucky after I get a chance to play with the camera — unfortunately unlikely at that price!)
Disclaimer: I don't have a Foveon-sensor camera (although I've used one, and it was cool!). I don't follow the technology very closely. Sigma is putting lot of research into working around or solving these problems.
The biggest reason "nobody" uses Foveon, I think, has little to do with Foveon and a lot to do with Sigma. Had Canon or Sony bought up the tech instead of Sigma, it would be mainstream by now, the basic idea is a good one. Sigma is a bit-player in this field, too small to do it all by themselves, and Sigma cameras are something of an acquired taste.
The sensor is fine ... or at least it was up to the 45Mp Merrill version. With the later Quattro version Sigma has abandoned the "pure" approach of capturing three colours at each location for a compromise, with fewer sensors in the lower layers.
But the sensor is not the problem. Anyone using it knows that it excels at low ISO, but is inferior to Bayer sensors with comparable REAL resolution at high ISO.
The real problem is that Sigma cameras are frustratingly slow and inconvenient to use, especially because of the absurdly slow write times. In the early days of affordable digital cameras we'd have been delighted with the SD1, but once you have got used to the speed of a good DSLR from Nikon or Canon it is hard to go back to waiting for two minutes for a burst of 7 shots to write to the card, and until that completes you cannot check your exposures, and you do not have full use of the camera's controls.
What is more, the camera makers continue to wring more and more performance out of the Bayer technology. It reminds me of the Porsche 911. The engine is in the wrong place, but with enough clever engineering the car can be made to handle as well as many better balanced front or mid-engined machines.
