From Engadget liveblogging of the event (time is local PDT):

 10:15am - "It's the most popular music player in history. People just love it. We want to make it better, and customers have told us how we can make it better. Customers want to watch video on their nanos on an even larger, brighter display. We'd like to put Cover Flow in, we think it's a great way to browse your music library."

"Games. More storage, and a full metal design. We're introducing a new nano here today... let me show it to you." It's the fatty!

10:16am - "It's incredibly tiny, this is the new nano, it's incredibly thin. It's REALLY nice." Huge applause. "Let me show you some bigger pictures of it... comes in beautiful colors. So what's the video like? New nano: larger 2-inch screen, it's going to look the same as it did on the iPod video, it's the same QVGA resolution. We've achieved this with a screen with the highest pixel density we've ever shipped."

[...]

10:20am - "Isn't that incredible? All in a product this big. Video, new UI with Cover Flow, games... let's take a look at the new iPod nano." Demo time again, Beatles album artwork in screen. He does this every time!

He's scrolling in Cover Flow -- it looks decent, but a bit choppy and slow. Not super surprising considering the nano doesn't exactly have a lot of horsepower under the hood. Don't expect the iPhone Cover Flow experience, people!

[...]

 

And this was the forbidden spy photo :

Here are the specs of the new Nano on Apple's website.

Related articles:
Rumor: 3G iPod Nano photos

8GB iPhone Price drops to $399
Apple announces a 160GB iPod Classic
The iPod Touch with WiFi announced

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