"We think it's one of the seven wonders of the world,'' Apple's chief executive Steve Jobs said as he pulled a new iPod Touch from a pocket of his jeans during a press conference in San Francisco.
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It's believed both the iPod and the iPhone are based on the same design and usability principles.
"If you've used an iPhone you will feel very much at home", said Jobs.
The new look music players feature Apple's Safary web browser and a built in wireless antenna, meaning music lovers can connect directly to the internet at Wi-Fi "hot spots".
Apple built Google and Yahoo search capabilities into iPod Touch models, along with YouTube compatibility and an iTune Wi-Fi Music Store that allows users to shop online without going through a computer.
With its upcoming release, the company also slashed the price of the popular eight gigabyte iPhones by $US200 ($243) to $US399.
"We want to put iPhones in a lot of stockings this holiday season,'' Mr Jobs said, drawing cheers from the sympathetic tech savvy audience.
Apple says the 8mm thin iPod touches will hit the US market by the end of the month but didn’t specify when it would be released in Australia.
Mr Jobs said the new models had been localised to an array of languages and would be the first part of the new product line up to be shipped worldwide.
"We are going to refresh or replace every single product in this line-up for this holiday season,'' he said.
The Apple chief executive also announced that the company had a newly formed alliance with Starbucks to let iPod Touch or iPhone users link wirelessly for free to iTunes Wi-Fi Music Store at any of the ubiquitous chain's coffee shops.
I think it is a deep and complete line-up," Jupiter Research analyst Michael Gartenberg said after watching the unveiling.
"A lot of consumers said they don't want a new mobile phone but they want all the other stuff the iPhone has."
"Apple has models with a range of appeal – fashion, function, price," Mr Gartenberg said. "Apple has set the bar high for competitors."
"I want an iPod Touch," said British musician KT Tunstall, who performed at the press conference.
"Steve Jobs is actually making it more fun to pay for music than steal it, which is great."