Apple iPod Touch
Not just an MP3 player, the iPod touch is now also a handheld games console. Significantly smaller than the DS and PSP, you can easily fit one in even the tiniest of pockets. You can get loads of simple and demo games for free from iTunes (or get full games like Sim City for a few pounds). At the time of writing, the second generation of iTouch has been released which means the price of the first generation iPods has dropped. So your cheapest option is an 8GB G1 iPod Touch.