Today, Apple introduced the iPod Touch. It's essentially an iPhone without the phone part, and without the speakers and built-in microphone. $299 buys you an 8GB sytem, complete with all the iPhone-like touchy goodness you've come to know and want. $399 buys you a 16 GB model with the same embarrassing name.
The iTouch includes built-in WiFi so you can use Safari and YouTube on-the-go as well as make purchases from the iTunes Store. (the iPhone will offer the same ability later this month). Its main button bar offers direct access to Music (great icon), Videos (ugly icon) and Photos (same old icon), as well as the new iTunes WiFi store.
The iPod Touch will ship "later this month".