The 40D has a new custom function that allows you to set noise reduction for high ISO. I have made some test shots comparing shots from ISO 800 to 3200 with noise reduction off and on. The following are 100% crops, the left side crops had noise reduction turned off and right side crops had noise reduction turned on.
ISO 800

ISO 1600

ISO 3200

To see the full 40D review, click here.

Were these captured in jpg or raw and then converted?
Perhaps the high ISO noise feature only affects jpgs…
I shoot in jpg+RAW and can see a difference in my high iso jpgs but not in my raws.
Perhaps, if you shoot raw+jpeg, you could also post the same crops of your jpegs?
I don’t see any difference… but I do echo Andrew’s question: does the high ISO noise reduction apply only to jpegs, or to jpegs and RAW? I’ve heard conflicting reports, which is kind of wierd. Image processin in-camera typically is only applied to jpeg (then interpreted for RAW by, in Canon’s case, DPP). I get conflicting reports about the “new” High ISO Noise Reduction”. What are the facts? If you take a pic in RAW with this feature off, take one with this feature on, then import them both into, say, Lightroom, will they be the same, or different?
I have the same question about Highlight Priority: JPEG only, or RAW?
Tony
[...] ^ Kazuto Ogawa picks up the 21.1-MP Canon EOS 1Ds MkIII and strikes a pose with models in the auspicious Canon red for the press journalists. Something about the colour red combined with beauty that intoxicates the photogs that evening to the point of oblivion
. ^ Model shows off the 1Ds MkIII and EF14mm 2.8 lens teasing the guests with a closer look. ^ Meanwhile back at the ‘photographers table’ Jason Ong gave my 5D/24-70mm a test drive and captured me and David Cheok eagerly checking out the images from his new EOS 40D and a series of much reported ‘improved’ ISO 3200 images. Those who are interested in more information on the 40D, check out my friend, Roland Lim’s 40D Review and its High ISO Noise Reduction feature. [...]
From Canon’s recent white paper Guide for Custom Functions and Camera Settings for the mark III http://www.usa.canon.com/uploadedimages/FCK/Image/2007/MARK%20III%20Suggested%20Settings%20121207/EOS1D_1DsMark_IIIoptimizingAFsettings_Final.pdf
High ISO Noise reduction only Combats chrominance noise (the colored dots/pastel like color deviations) while not affecting luminance noise (dot like noise, ’salt and pepper’ speckles). It reduces the amount of colored speckles, while leaving luminance noise alone as that must be blurred away, potentially reducing resolution.
Also High ISO noise reduction only effects JPEG images, as it said, no processing is done whatsoever to RAW images, you’ll need to do your own noise reduction in DPP or photoshop.
Though even if you set the output to RAW only it still reduces the cameras image buffer as it still processes the image to make the embedded JPEG image for the RAW file, so if you shoot exclusively in RAW it might be best to turn off High ISO noise reduction. (Though I may be incorrect on this last point, its based on whats said in the PDF and experience with the 40d)
Highlight Tone Priority from my understanding is Both JPEG and RAW as it adjusts the (tone curve? exposure?) bias towards highlights in order to get more detail in the upper end.