Moore's Law: The amount of processing power you can put on a square centimeter of silicon doubles every 18 months.

This holds more or less true in most cases. So the PS3 (which as of this winter will be 3 years old) will have theoretically shrunk in needed silicon size to 1/4th. All the chips could theoretically be made 1/4th as big, and more efficient so they use less power, so the power supply can be shrunk (and a ton of space in the OMG XBAWX HUEG PS3 case is taken up by the power supply)

It wouldn't be hard to shrink.

(I in no way condone or support the existence of a PS3 slim. I'm just saying it's technically possible)

Smaller chip size means smaller fans means less electricity needed® .....NOW.......B_E_L_I_E_V_E

It's really about the internal brick (PSU). Less energy requirements means less cooling is needed.

There are other things, but as long as the CPU/GPU/Memory board is cool the whole thing doesn't need to be so big.

FFXI came out bundled with the HDD and was an Online only game

what? sony does it all the time.
they are japanese. and thats the only reason they need and will do it.

i bet soon can get as small a netbook. they need to figure out a better cooling though.

and a SSD HDD when it gets cheaper would save alot of space, and would require less cooling.