And when I say "waterproof", I don't mean "weatherprotected", like many premium system cameras claim to be. "Weatherprotected" usually just means that there is are simple gaskets wherever there are joins in the body material. This keeps out some drops of water, but it is nowhere enough to protect against submerging. The Nikon 1 AW1, on the other hand, is truly waterproof in the sense that it can be taken 15 meters below water.
However, what is somewhat undercommunicated, is the amount of care you must spend time on for the camera to actually be waterproof. People who do diving will be familiar with this procedure, but the layperson may think that you can just grab the camera and go snorkelling. No, you can't.
Before every submerging of the camera, you must unmount the lens, remove the O-ring, clean the lens mounts, and the O-ring, lubricate the O-ring, check for cracks and foreign objects, and then assemble it all again. After submerging the camera, you must repeat the process. There are also two hinged doors which require inspection. The process is outlined in this video:
For the process, you'll need a tube of silicone grease for O-rings, one is included in the box when you buy the camera. Also, you'll need a microfiber cloth for cleaning various surfaces. A dust blower is good to have in addition. Finally, fresh water for cleaning the O-ring.
After greasing the O-ring, checking the door gaskets for foreign objects, mount the lens and close all the doors. Then, test the camera in fresh water. Some air will escape. Turn it on, and see that it works. Operate the zoom ring. If anything fails, let it dry and take it to a repair centre.
The Nikon 1 AW1 is an amazing camera, with the unique waterproofness. However, be warned that there is an involved process of preparation before you can use it underwater.
You may still want to have the camera for use while hiking, for example, and you don't need to be afraid to bring it out during rain, even if you have not applied the proper O-ring care. It is the water pressure which is problematic when submerging it, not the water in itself. So the Nikon 1 AW1 can be a good "beater" camera to bring along everywhere.
Future for the system?
So far, only one camera and two lenses are available, the Nikon AW 11-27.5mm f/3.5-5.6 kit zoom lens, and the Nikon AW 10mm f/2.8 prime lens. Is Nikon going to continue developing this waterproof camera system?
The Nikon 1 AW1 was announced in September 2013, two years ago now. Since this is a niche camera, I would guess that there is a slower release cycle, meaning that if an updated AW2 camera is released, it could very well be in late 2016. So at the moment, there is no way to be sure.
As for lenses, there have been rumors that a waterproof version of the Nikon 1 10-100mm f/4-5.6 VR superzoom lens. I don't find that rumor too convincing, as the AW lenses are also shockproof, which does not go hand in hand with a VR (optical image stabilization) lens, I believe.
A more recent patent hints that a waterproof AW 7.2-13.6mm f3.5-4.5 may be on the drawingboard. I think this sounds more plausible: It would be a larger, more professional lens, with a real wide angle short end. Underwater, due to the refraction in water, you need a wider lens for a wide angle effect, compared with on land. So this lens would be for those who are serious about underwater photography, and would be willing to pay the price. I would guess such a lens could cost around US$600-800. It would become one of the bigger CX lenses.
The reception of the Nikon 1 AW1 has been mixed. There have been some users on discussion forums complaining about the camera leaking, and in some cases, Nikon has not covered the repair or replacement. Given the involved process to make it waterproof, it is fair to guess that there have been some cases of user error here, though.
On the other hand, even serious reviewers of underwater equipment have complained about water leaks. This hints to some problem with the construction, which is potentially a much worse problem. These issues form a dilemma for Nikon: Do they continue to develop a system which generates poor reviews online, and users complaining about leaks? Or do they abandon it, and leave the niche for the competitors to pick up? I think Nikon would like to own this segment, but not at any cost.