Olympus TG-4 has a 16.0MP 1/2.3-inch (6.17 x 4.55 mm ) sized BSI-CMOS sensor and features TruePic VII 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.
Olympus TG-4's sensor provides 6MP more than Olympus E-420's sensor, which gives a significant advantage in real life. You can print your images larger or crop more freely.
On the other hand, please keep in mind that Max sensor resolution is not the only determinant of resolving power. Factors such as the optical elements, low pass filter, pixel size and sensor technology also affects the final resolution of the captured image.
Below you can see the TG-4 and E-420 sensor size comparison.
As seen above, Olympus E-420 has a 8.0x Larger sensor area than Olympus TG-4. 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.