Mac OS X 10.3 Panther w/ X-Tools
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New features include Fast User Switching (you no longer have to log out so another user can log in), Exposé, File Vault (use at your own risk), and iChat AV, which added voice and video conferencing to the Mac's messaging client. TextEdit was updated to support Microsoft Word documents.
Minimum hardware requirements are a 233 MHz G3, a built-in USB port (requires "New World" ROMs), 1.5 GB of available hard drive space, and 128 MB of RAM, although more is recommended. 256 MB is better, and 512 MB better yet.
Panther was the first version of OS X to drop support for some of the oldest Macs that had been supported through 10.2.x. Still, it was a short list: WallStreet PowerBooks and the Beige Power Mac G3. In reality, Panther can run on these systems, although Apple's installer doesn't permit it. XPostFacto runs under Mac OS 9 and works around those limitations - version 4 supports OS X 10.2 through 10.4 on many unsupported Macs.
This is the oldest version of OS X that still have several fairly up-to-date browsers to choose from, although recent betas such as Camino 2 and Firefox 3 are not compatible with it. The latest versions of Opera and iCab are compatible with Panther.