You sure you want digital?
Actually for a beginner digital is best because you can take a lot of pictures and learn from your mistakes easily.
I learnt (and am still learning) photography with film cameras, and if you really want to get to the purist nuts and bolts of the art at a very low price you could consider a film (35mm) camera.
Older cameras offer a lot more manual control over the picture, and manual control is what learners need. When you press the shutter on a compact, the fairly complex (but not that hard to master) process of composing the picture takes place fully automated, so you will never really know about this process. When you compose a picture on an SLR, you have to consider shutter speed, aperture, light sensitivity, focus and depth of field very seriously. A digital SLR will offer this control, but the cheapest one is £250 and not that brilliant, not to mention fairly big.
If you like the idea of getting to the heart of photography on a small budget, browse around on eBay for a Minox 35, the camera that taught me photography. This is a very compact camera, the smallest 35mm film camera ever in fact. It is an aperture priority camera, which means that you choose the aperture and it chooses the shutter speed for you. Focus is done by scale i.e. guesswork (sounds hard, but the wide-angle lens means that depth of field is quite large, allowing you a lot of room for error. Besides, guessing a distance is a lot easier than it sounds).
If you want to just snap about, ignore what I said in the last paragraph. *Old-school mode off*
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