There have been multiple rumors surfacing lately that Apple is working on a smaller iPhone "Nano." The device is rumored to have a smaller form factor and use cloud-based storage (possibly in accordance with a revamp of MobileMe).
iPhone Nano concepts have been floating around since the rumors gained traction, and a design concept by Max Rudberg stands out from the rest. Max runs Max Themes, and has developed popular jailbreak themes (such as Glasklart and Serious SBSettings).
Max came up with a very interesting concept for how a smaller iPhone Nano could operate without a home button...