The Vonage V-Phone can be considered one of the smallest phones in the world, it just depends on your definition of telephone.
This kind of phone comes in a USB form and works via the internet (much like the popular Skype), the full V-Phone package contains pre-installed software and a microphone to be plugged on the side of the USB. This pre-installed software made by Vonage has the basic phone features like capable of making/receiving calls (duh), but it also has not-so-basic-stuff caller ID and call forwarding – all this can be done/seen on the interface that will appear on the monitor after you plug it on the USB port.
One of the important details is that for one reason or another, while making use of the V-Phone you won’t be able to call the real 911 whenever you have an emergency, but the Vonage staff took care of that by including an emergency line of their own that will help you get what you need.
Strong points: it can be considered a small phone which is good for portability; your contacts can be inserted on the list (read software) for future use; it’s easy to use; it can also work as a portable storage device because of the 250MB of space included.
Weak point(s): only works with a computer + internet; the USB piece has a vonage phone number.
The V-Phone itself costs $40 and there are different plans you can chose from to make your calls.