The Sony PSP2 has arrived under the codename NGP. It has a 5-inch OLED touchscreen, dual analog sticks, front/rear cameras,a touch-sensitive panel on the back of the device used for control along with a quad-core CPU and GPU.
Update: Turns out the internal magic of the PSP2 lies in its quad-core ARM Cortex A9 processor and quad-core PowerVR SGX534MP4+ GPU. I'm scared to think how big the battery has to be to power this thing.
In addition to the above specs, the PSP2/NGP has 3G, Bluetooth and GPS, along with wi-fi, and Sony claims this thing is as powerful as a PS3. The 5-inch screen is roughly 4x higher resolution than what's previously been featured in PSP devices (960x544). Kotaku says the screen is a beauty with impressive viewing angles.

UMD is nowhere to be found—which should come as no surprise—and the PSP2 instead opting for a new form of storage. Meanwhile, Sony is putting huge emphasis on social and location-aware gaming.
As for the rear touch-sensitive panel, it takes up roughly the same amount of space as the screen, and responds to more than one finger at a time. In a game demo, it demonstrated how you could use the rear panel to flick beach balls up into the air on the screen. Touch a spot on the rear panel and the screen will respond accordingly in the same area.

The SIXAXIS controls, meanwhile, add motion controls akin to those of smartphones. And for those attached to more traditional methods of gaming, the standard D-Pad and four-button cross layout are also there (with L/R shoulder triggers as well).
The PSP2 will come with new internal software called LiveArea, which is all about connecting you to nearby gamers. You can login and see who's playing what games nearby, what the high scores are in a given area, and connect with other gamers.

Sony also seems keen on ridiculous descriptors for various aspects of the PSP2 (such as the acronym NGP for Next Generation Portable). They are also calling the design "Super Oval Design," and referring to the analog thumbsticks as "Micro Analog Sticks," which shouldn't be confused for nubs.
In short, this is a ridiculously powerful device in a small package. And here's the kicker: it should be available by the 2011 holiday season.
For more on the PSP2, checkout Kotaku's liveblog straight from the Playstation event in Japan.[Sony via Kotaku]