You would almost think it is harvest time, because again we have heard a rumour of a smaller iPhone; the Nano.
iPhone Nano rumours are not new. It suppose to be Apples answer to a cheaper and smaller iPhone. Nevertheless, with the iPhone 3G Apple already has lowered the price of the device tremendously, so this argument doesn't really count.
This time the rumours are being fed by phone cover producers. The Nano is probably going to have the same height as the iPod Nano, although the iPhone Nano is broader and thicker. That is, if the iPhone is 'real'. And it doesn't look like it. One reason is that all the applications of the App Store can not deal with the lower resolution, because a smaller iPhone means also a lower resolution.
Source: MacRumors