With tiny, high pixel count chips noise is always going to be an issue, and to a large degree this is more a test of the effectiveness (both measurable and visible) of a camera's noise reduction system. Designers have to balance the desire to produce smooth, clean results with the need to retain as much detail as possible (if you blur away the noise, you blur away image detail too).

Noise and the effects of noise reduction are visible at all ISO levels. Up to ISO 400 the H3 does comparatively well, striking a good balance between noise reduction and retention of image detail. At sensitivities higher than that things get a little nasty. ISO 800 is bad, ISO 1600 is firmly based in the emergency camp and one can only speculate why Sony even bothers to offer an ISO 3200 setting, the results are amazingly similar to the ones you get out of the Watercolor filter in Photoshop.

ISO 100 ISO 200 ISO 400 ISO 800 ISO 1600 ISO 3200
100% Crops

Noise graph

Indicated ISO sensitivity is on the horizontal axis of this graph, standard deviation of luminosity is on the vertical axis. The graphs demonstrates that noise reduction already kicks in at ISO200 and then stays at a fairly moderate level up to very high sensitivities. Of course this doesn't mean there isn't any noise, it's simply blurred away by the noise reduction algorithms and with it most of the image detail.

Low contrast detail

What the crops and graph don't show is the effect of noise reduction on low contrast fine detail such as hair, fur or foliage. An inevitable side effect of noise removal is that this kind of detail is also blurred or smeared, resulting in a loss of 'texture'. In this test the crops below show the effect of the noise reduction on such texture (hair) as you move up the ISO range.

100% Crops
ISO 100 ISO 200 ISO 400
ISO 800 ISO 1600 ISO 3200

At close inspection you'll discover some blurring of fine detail even at ISO 100. From there things only get worse and at ISO 200 the noise reduction smearing is already more evident then you'd wish, and at anything higher you're sacrificing an increasing amount of detail for a noise-free image.

There's not too much difference between ISO 200 and 400 (both show some smearing) but above that the magnificent blonde hair of our 'model' turns into an unidentifiable yellowish mass. If you want fine detail and textures to be visible in your images ideally stick to base ISO but definitely never go any higher than ISO400.