In terms of design, the iPod Nano and the Shuffle are really the standout contenders. (The iPod Touch? It really has become just an iPhone without calling.) The Shuffle returned to form with a classic clickwheel, yet we love iPod Nano's fresh, versatile design.
The square, stamp-like body of the Nano was made so that you could clip it onto your shirt. People have quickly found another way to wear it, though: as a watch. It works well and it looks good, yet it has us wishing for a pair of wireless earbuds. Running a cord down to an MP3 player on your wrist just seems awkward.
Here's another view of the watch since they're just oh-so-purty: