Thought I'd share an image I shot in a local blacksmith's shot the other day, another good example of why re-directing the pop-up flash creates more natural light rather than just using a flash diffuser of some sort. The pop-up flash with a small diffuser in front of it still comes from the top of the camera (in alignment with your forehead). And small diffusers may be okay for close-up work but not for typical candid shooting. Redirecting by bouncing the flash off a wall, ceiling, etc., emulates the direction of natural light as well as diffuses it.

 http://farm2.static.flickr.com/1347/859714178_12eae48e0e.jpg