I know of several startups working on ipad 2 games that uses the ipod touch or iphone as the other controller. Or even THE controller. It's actually pretty cool.
The one I played made me think ... WOW ... goodbye console wars.
I was at an airport a few years ago and the plane was delayed. A mother pulled out her iphone, gave it to her kid and said he if he wanted another game he could only spend $1. The kid was entertained for the next hour while we all waited for the plane. I knew then that dedicated portable consoles were dead.
The one I played made me think ... WOW ... goodbye console wars.