Canon SD3500 IS has a
14.0MP 1/2.3-inch (6.17 x 4.55 mm ) sized CCD sensor and features Digic 4 processor. On the other hand, Olympus XZ-2 iHS has a
12.0MP 1/1.7-inch (7.44 x 5.58 mm ) sized CMOS sensor .
Below you can see the SD3500 IS and XZ-2 iHS sensor size comparison.
As seen above, Olympus XZ-2 iHS has a 1.5x Larger sensor area than Canon SD3500 IS. 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.