Our first Speculations and Rant.
The idea of a SR is to give viewers some insight into possible speculations of current markets. They're not designed to be too long, generally just a single page like this one. It helps to see these types of articles as sort of a polished rant or general discussion where no real evidence may exist.

Canon Powershot G7, continuing the tradition.... maybe.
Having once been an owner of a Canon Powershot G3, I can tell you that the G series of the Powershot line has been a great series. Others such as myself who have owned one of the G series up until the most recent G7 find it to be an ideal backup camera to their more serious shooters. Two of the main features that was very well enjoyed in the G series was the ability to shoot in raw format, and the swivel LCD screen. The G series pretty much been a very good prosumer camera, both small and easy to use, but also versitile and feature packed. Howerver when the Canon Powershot G7 was announced those two little features that seemed to make all the difference were removed.
One would think that as technology reached new limits, the newer and better devices would be able to perform all the same tasks the previous models have. There are those of us who normally would prefer to shoot with a DSLR, and prefer the raw format, but sometimes cannot take the larger system with them everywhere they go. The Powershot G series was a idealbackup for those kind of shooters, who still wanted to shoot Raw, but needed something portible. As far as the decision to not provide raw support anymore could lead to a few speculations.
Speculation A: Marketability.
The most credible speculation if any would be the use of pure marketing in a decision. It is very credible because a lot of different manufactures have done some silly little things to drive profits to other areas of their market. It is plausible that if crippling one line of products will drive revenue to another line of products that the manufacture would simply do so. Something like this normally hurts smaller companies as a whole, but larger corporations usually feel their branding is strong enough that consumers may simply just buy the next one up rather than look to other brands.
The speculation here is that Canon possibly saw that Digital SLRs aside from their numerous benefits may not be as appealing as a smaller point and shoot or prosumer model. If the prosumer model can perform similar functions and provide a somewhat jack-of-all-trades feature set, then many would likely go with that camera, or purchase that model as a backup as many have done before, hence the benefits of the G series. So by striping all of the powershot models of raw format capabilities, they would likely drive consumers into spending an extra hundred or more on a DSLR setup. The prices of Digital SLR now days are about the same if not cheaper than most prosumer model cameras, but the benefits to a prosumer model is the "all in one" package deal. Digital SLRs are not a jack of all trade, they are typically tweaked to the user's desired application.
A past example of the practice of limiting one model to drive revenue to a model would be when they released the original Canon Digital Rebel (300D). The Digital Rebel in many aspects was similar to the existing Canon EOS 10D at the time aside from some physical traits. Many consumers would be just happy with the 300D if it were not for some software limitations. Such limitations as not allowing second curtain flash, selectable JPEG size with raw, flash exposure compensation, and mirror lockup just to name a few. So that is Speculation A, Marketing.
Speculation B: Digic III Issues.
The second speculation, is that there may be a problem with the Digic III processor ability to process raw files. Right now there is only one camera in the powershot line with Digic III in it, and none of the other current powershots models support raw files. Because of this it is not unlikely this would be the case, or that it would cause anyone to bat an eye. At the rate of new cameras in this market, it would not be surprising if a number of models were release half finished from their intended goal.
Speculation C: Upcoming Technology
This speculation is something that some may not care to hear about especially if they just purchased a new camera. But the the speculation is that Canon is working on a new Raw format, possibly dubbed with a .cr3 extension for the Digic III processor. The next DSLR to come out onto the market with the Digic III processor, may possibly sport this new raw format. Not really sure why we'd need a new raw format, like we would need a new memory card format, but I would not be surprised if this were the case.
Conclusions
In the end it could have just simply been a decision based on the targeted consumers. Maybe Canon felt that general consumers did not need raw support and including such would cost more than they wanted to spend or may confuse consumers. However simply put by removing said feature from the G series, and the advancement of their other series removes good deal of benefits if not all in terms of purchasing a G series over a lower end powershot. Without some of the previous features, consumers might as well buy a A series camera with a swivel screen and comparable resolution or go buy a Panasonic which offers the same features the G series once had.
If the third speculation is where it is going, then I feel that Canon should probably just move to DNG and get it over with.