Steve, coincidentally, Mrs T took a bunch of family photos over the Christmas and it's the same story. They are all blurred, grainy or both. Very disappointing. She took them with my Panasonic Lumix which is a capable little compact.
I just looked at how the camera was set up (right click thumbnail of the image in windows, select properties, go to 'detail' tab). Sure enough, on the worst ones, the shutter speed was 1/4 of a second, which almost guarantees camera shake, The ISO was at 1000 as the camera tried to cope with low light. The culprit was simply that I'd left the camera in compulsory 'no flash' setting (the details tab also shows this). Sue thought that the flash was going off, but it wasn't. Even though the camera was in intelligent auto mode, this doesn't override the 'no flash' setting.
It does look to me from the pic you posted as if the flash either hasn't gone off at all, or hasn't been effective in providing enough light.
The other thing that occurs to me is that many digital cameras really struggle to autofocus if light levels are low. That might also account for blurriness, and there's not much you can do about that one.
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Last edited by Tannhauser; 12-28-2012 at 07:40 AM.