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So here's what it's packing: dual analogs sticks, a 5 inch OLED display, 3G and GPS, front and rear touchpads, electronic compass on 3 axes. Awesome iconography on the back.
It's not the PlayStation Phone, but it is PlayStation on phones. Sony's Kaz Hirai just announced "PlayStation Suite," which "provides PlayStation content to other devices" including Android devices.
What kind of PlayStation content? According to Hirai, "We will first emulate the first generation PSP titles to be available on PS Suite devices." All the titles shown so far are actually PSOne games, including Cool Boarders 2, Syphon Filter, Rally Cross, WIld Arms, and Medievil. In addition, Sony intends PlayStation Suite to be used as a framework for the development of all-new games for mobile platforms. PlayStation Suite is due by the end of this calendar year.

That 5" screen has a 960x544 resolution. Compare that to the iPhone 4's 960x640 3.5" screen, and it's not as impressive, but OLED is going to look great. It's coming "holiday season" this year!
There will be physical media for games, a New Game Media, a flash memory-based card. So UMD is out, but retail isn't entirely kicked to the curb. Hey, that cart looks almost like a DS cart! Another pic from Engadget:

Other games shown to be in development include: Hot Shots Golf, Gravity Daze, Smart As, Broken, LBP, Little Deviants, WipEout, Resistance, and Uncharted (!)
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Monster Hunter Portable 3rd will run on the NGP.
Looks like we've got Lost Planet 2, rendered in real time, on NGP.
The quality of the image is quite nice. Just slightly less detailed than the PS3 version.
Just slightly less detailed than the PS3 version


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