You bring into play the setting (panoramic) take a photo when you go for next shot the edge of last image is in the view finder to be able to line up with next shot.
That's how Canon cameras work. There may be others but I'm most familiar with Canon.
It works effectively and their ZoomBrowser software included with each camera makes stitching the photos together easy.
If you need a pocketable camera, take a look at the Canon A or SD series. The A series are compact; the SD series are ultra compact. I've owned both and have been very pleased with them.
I've written about a few of them in my Blog and, though newer models may have a minor additional feature or two, you can get an general idea about them in the Blog:
http://www.digicamhelp.com/camera-logs/