Nikon L120 has a 14.0MP 1/2.3-inch (6.17 x 4.55 mm ) sized CCD sensor and features Expeed C2 processor. On the other hand, Fujifilm X-M1 has a 16.0MP APS-C (23.6 x 15.6 mm ) sized CMOS X-TRANS I sensor and features EXR Processor II processor.
One other difference between these two cameras that is worth mentioning is that Fujifilm X-M1's sensor doesn't have an anti-alias (Low-Pass) filter. Removing anti-alias filter increases the sharpness and level of detail but at the same time, it increases the chance of moire occurring in certain scenes.
Below you can see the L120 and X-M1 sensor size comparison.
As seen above, Fujifilm X-M1 has a 13.1x Larger sensor area than Nikon L120. 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.