1. In-camera panoramas: Some models only fire three shots, and then automatically stitch them together. Although convenient, the downside of this approach is that they don't come out perfect. From my own experiences, I've ended up with images that have missing or detached limbs or curving horizon lines. (Click here to see an example of a bad panoramic image created by one camera's built-in image-stitching feature.) If you're careful, you may be able to work around some mistakes, but others may be unavoidable.
2. Panoramas stitched in software: Other cameras let you take as many shots as you want, but leave the art of digital collage to you. In other words, you'll need to transfer your photos to your computer and import them into an image-editing program or photo-stitching software in order to piece the shots together. The downside here is that if you don't take enough photos or align them properly when you're composing your photos, you might end up with fractured panoramas. It's also a manual process, which generally takes more time than the first method.
3. Panorama sweep: Recently, another type of panorama mode has emerged. (It's found on the recently announced Cyber-shot DSC-HX1 superzoom.) This one fires off dozens of shots while you pan across an ultra wide range, either left-to-right or right-to-left. As with most other cameras, the HX1 resizes panoramas to around 5 to 10 megapixels, so that they aren't too large. But because it uses in-camera stitching to complete the process, it will more likely create the same sorts of errors as the first method, above.

Of course, if you're photographing panoramas of moving subjects, like a large crowd, it's going to be nearly impossible to avoid some mismatching edges, no matter which type of method you use. You'll have to make some decisions or concede to some compromises, whether it's convenience or time.

Then again, you might try to look at your panoramas in a new way. For example, I'm a big fan of fine-art photographer, David Hockney. As you can see with some of his shots, he uses distortion, dislocation and mismatched edges to enhance the composition. Another photographer, Simon Hoegsberg, recently appeared on American Photo magazine's website for his very interesting panoramic project, "We're All Gonna Die -- 100 meters of existence", which emphasizes people instead of the landscape.—Terry Sullivan