According to sources, the device you see above is a prototype of Apple’s next-generation iPod Nano. It features a 1.3-megapixel camera while “retaining its clip-on design.” This was made possible thanks to “a metal housing for a camera assembly protruding from the back of the main case and sitting flush with a hole in the device’s clip.” Continue reading for more pictures.

The design would allow Apple to squeeze a camera into the current diminutive form factor of the iPod nano by moving much of the lens and sensor hardware outside of the main casing but still within the overall device envelope by utilizing a small portion of the gap between the device and the clip.

[via MacRumors]