The first question is SLR or compact?
SLR's are better, they cost more, they are bulkier and need a case. They have more knobs and dials to play with, have different lens to attach and will produce excellent photos consistently(if your good). With SLRs you plan your photos & where you take your camera as you have to carry it with you.

Compacts are smaller, cheaper and fit in your pocket! They are usually pre-programmed and mostly automatic. They will struggle under some conditions and photo quality will not be as good as an SLR. As they are small and fit in your pocket they are ideal for carrying around, great for holidays and parties.

This is again
what do you want for question. I find that with an SLR I actively go out to find photos, I'll go for walks and plan day trips and come back with a camera full of photos. With a compact I let the photos find me, I just put it in my pocket, I might take it out I might not!
For $500 you will be looking at a high-end compact or a low-end SLR. Both have their merits.