The best travel camera for small size is the Canon S100.
For not-small size its the dSLR Nikon D5100. You will get better photos from the dSLR but it's bigger.
I travel with both, one in the pocket that I can use in a second, the other in my bag for when I'm out doing serious shooting.
Canon makes the best small cameras. You can argue if Canon or Nikon make better dSLR's but I've had a Nikon D50 for 6 years and the thing has survived so much bouncing around in my backpack its unbelievable. I almost wish it would die so I could get a new one, but it keeps cranking out amazing photos that I can't let her go!
If you want to spend over $1000 the game changes, but you're getting into "boutique" cameras at that point.
I've tried making my iPhone 4 my "pocket" camera but it sucks. In good light it takes nice photos, but most of the time, like dinner shots with friends at night, it makes 7MP blurry junk. Get a small point and shoot