Both Canon S120 and Panasonic TS3 have 12.0 MP resolution sensors but Canon S120's sensor is 1/1.7-inch (7.44 x 5.58 mm ) and Panasonic TS3's sensor is 1/2.3-inch (6.08 x 4.56 mm ).
Since Canon S120's has a larger sensor area with the same resolution, this means that it also has a larger pixel area hence better light collecting capacity for a given aperture compared to Panasonic TS3.
Below you can see the S120 and TS3 sensor size comparison.
As seen above, Canon S120 has a 1.5x Larger sensor area than Panasonic TS3. Larger sensors give photographer more control on the depth of field and blurry background compared to smaller sensor when shot in same focal length and aperture.