I have been shooting for quite a long time and have loved photography since my early days of being a Boy. Although the years have changed and I have had some minor upgrades to my gear, overall, the technology hasn't changed much going from film to digital. Yet, when people see some of my work, I always get the same responses. It's something to the effect of, "WOW, you must have a really nice camera," or "What camera do you use? "
Although I do enjoy their flattery and recognize their sincerity, their statements aren't really relevant. It's like saying that Van Gough must have had the best paintbrushes money could buy regardless of the fact that he was poor all his life. Silly right? All the camera is, is just a tool that someone uses to capture a moment with, nothing much more.
What it really comes down to is the persons ability, practice, and understanding of that tool to be able to get it to do what they want it to do.
To better illustrate this let me tell you about a class I took at a community college a few years back. When I was younger, seeing that I didn't have any formal training and wanted to learn how to process my own film I took a intro to photography course that was film and dark room based. After talking with the lab tech, we got onto the subject of krappy kameras and more specifically our love for the Holga. I had never used one but wanted to and decided to go and buy one. $30 later with my brand new camera and a roll of film in hand I set out to do my final project for that class. Although my teacher advised against it because Holga have no control over anything, I risked a bad grade. To make a long story short, I got an A for the project. All of the other students were dumbfounded by how my cheap camera produced such good pictures where their DSLRs came up short. It was simple, I practiced, researched, and understood how my camera worked. It wasn't because my camera was more expensive or that it had more bells and whistles but because I understood how it worked.
So, take the time to play around with your camera, adjust its settings, see what it does, and become familiar with it before you feel like you NEED to get a new camera to become better at photography. Not that new gear is nice, but it could save you some coin and improve your skills by doing so.
Here is a couple of links to some of my favorite pictures that have been taken with either a cell phone and krappy kameras:
http://www.flickr.com/photos/mn10bikr/6855439556/in/faves-24796819@N04/
http://www.flickr.com/photos/mn10bikr/6061851303/in/faves-24796819@N04/
http://upload.wikimedia.org/wikipedia/commons/thumb/5/5f/Holga_sample.jpg/205px-Holga_sample.jpg
http://farm4.static.flickr.com/3155/3354113288_4c66740816.jpg
The following were taken with my cell phone, one of the best cameras most of us have because its always with us.
Also here are some other examples from my very first DSLR I bought that I still have today. These shots are from just a couple of days ago when I was out on a photo walk with some photo enthusiasts in the Phoenix area. I shot these with a Rebel XTI that I have had for years and a cheap, Tamron kit lens. All of which you can pick up for probably less than $200.