iPhone - phone = iPod touch
Apple introduced a new line of iPods today including the drool-worthy "iPod touch", a completely touch-based wide screen video iPod. It's basically the iPhone without the phone.
The iPod touch is available with either an 8GB or 16GB flash drive, and features built-in WiFi (802.11b/g). The new iPod can wirelessly connect to the iTunes music store without a PC or Mac. You can preview and buy songs online, and when you do go back to your base station it will sync up with your local music catalog there. There is no extra charge for this service, which will also be available on the iPhone with the next software update.
Apple also dropped the price on iPhone, so now you can get an 8GB iPhone for $399, or the iPod sans the phone for $299. Due to lack of demand the 4GB iPhone is being discontinued; no word yet on when you'll be able to get a 16GB iPhone.
The storage capacity on the iPod "Classic" has been upped to 160GB, or about 40,000 songs. Also the Nano has gotten a makeover - it can now play video on its tiny 2 inch display. The new models are available now, except for the iPod touch which will be shipping later this month.