Canon XC10 has a
12.0MP 1' (12.8 x 9.6 mm ) sized CMOS sensor and features DIGIC DV5 processor. On the other hand, Olympus E-420 has a
10.0MP Four Thirds (17.3 x 13 mm ) sized CMOS sensor and features TruePic III processor.
Below you can see the XC10 and E-420 sensor size comparison.
As seen above, Olympus E-420 has a 1.8x Larger sensor area than Canon XC10. 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.