An iPod holds about 40G; sometime in 2005, Moore's Law says, the corresponding appliance will clearly be an 80G camera/phone/PDA.
It won't be a laptop replacement. If you want a fast CPU and a good screen, you need to burn watts, which means big batteries and a tether to the power outlet. But the scale of iPod-like personal storage is going to have enough capacity to keep all your working documents, sketches, and personal files. Your User Folder, in other words. And, if you've got your User Folder with you, you can pretty much get down to work anywhere.
"What about applications?", you ask. Well, we've solved that already. Say you use Tinderbox, but you didn't bring your laptop -- just your user folder. No problem: download Tinderbox again, and it recognizes that you're registered and you're all set. Interesting!