Well.
Even though this image is labelled as a "Concept" Image, I can tell that this will not happen. For one, the AppStore doesn't look like it would be included, as every app would have to be rewritten so the UI could display correctly (320x480 & 480x320).
Also, the tiny size of the device is sort of like the "Fatty" nano, Apple would probably remodel it in a year and release an iPhone Nano 2nd Generation in the same shape as the 4G Nano. 😀😀
WiFi probably wouldn't be included, and the Camera would probably be missing, these objects in such a device, require space people! Fair enough that the Motorola RAZR has a camera in the (very) slim casing, but it is shocking quality, Apple would have to dumb down the camera quality if they still wanted to include one. The WiFi may still be included, but the GPS would be out, the Bluetooth still in and a few crucial "What makes the iPhone the iPhone" features would have to be dropped.
Don't you agree?