The previous generation of iPod nano had more features than the current one. The older model packed a bigger display as well as a video camera to capture 720p video. While the quality wasn't great, it gave a very popular music player a camera that worked for casual capture uses.
The current iPod nano dropped all of the video camera features in favor of a smaller form factor with a multi-touch screen. For many, it was a step backwards. Now, there are signs that point towards there being a camera being shoehorned into the little new nano's body.
A picture obtained by the Taiwanese Apple.pro site show a metal casing that's purportedly for the next iPod nano. On it is camera hole that could mean that the next iPod nano will be a tiny, little spy cam.
