Unlike the big star of the event, the new iPod nano is a nothing upgrade to a dead-end product. It doesn't have iOS, apps or WiFi, so there's no way to consume music from the cloud (Spotify, Pandora, Sirius, YouTube, etc.) The only music supported on the iPod nano is whatever you sync from iTunes -- via a cable, no less. Which is Lame.
The Verge's Nilay Patel called it "an impulse buy holiday present that almost makes it seem like you care about the recipient."
Unlike the iPhone and the iPod touch, the iPod nano is a product looking for a problem to solve. Someone looking for an inexpensive music player, could easily pick up a $49 iPod shuffle instead.
Patel put it even more succinctly when he said that "anyone thinking about spending $149 on the iPod nano should tap-dance on street corners until they make the extra $50 it takes to buy the entry-level iPod touch instead."
(Patel got the price wrong, the entry-level iPod touch costs $150 more.)
There are two potential reasons why Apple eliminated the square iPod nano form-factor:
1) It cares more about selling (and renting) movies that it does about giving you the time of day, or...
2) Apple's building its own iWatch and doesn't want to compete against itself.
The latter is a conspiracy theory raised by gdgt's Peter Rojas that I happen to like. Maybe it's just wishful thinking?
It's easy to imagine all the things that an iWatch could do: it'd be the perfect accessory for an iPhone or iPad. Bluetooth 4.0 could make it a satellite screen for your larger iOS device (which could stay in your pocket or bag) while it displayed things like Tweets, Facebook posts, text messages, emails or the currently playing track. If Apple sold it for $99 (granted, a long shot) it would sell one with every iPhone and iPad sold.
Apple's already innovated the hell out of the palm, now it's time to tackle the wrist.