VG247 claim to have gotten a hold of some details of the next PSP model from Sony. According to VG247 the device will not (99% certainty) be shown at E3, but is very much a reality. Several British developers have confirmed that they have had confidential PSP 2 documents for several months in order to adapt their development.
PSP 2 will sport two cameras, both on the front and back. It features a touch screen, but still comes with the face buttons we have gotten used to with Playstation. It is targeted for release in 2011, even though a late 2010 release isn't completely out of the question.
One big question mark is how games will be delivered to the device, but according to VG247 the device will sport a 3G connection and thus it may also be possible that it will have phone functionality.
A large number of titles are said to be in development, and have been so for a long period of time. "Complete" units are said to be in existence, but very few have actually seen them. It is said to sport 4 Cell processors (PS3 has 8), which would obviously make it extremely powerful.