Traditionally, the gating factor on how small mobile phone buttons could be was set by the width of the human fingertip–around 2 cm (3/4 of an inch). Technically, half that width serves as a workable target in most cases (10 mm), since it’s possible to compute the intended target, even if there’s overlap of adjacent areas, although this depends a great deal on the type of switches or touch-screen technology used.
You can also buy yourself a bit more room by adding vertical and lateral “pitch” (curvature) to the keys of a physical device. This effectively gives you a larger surface area while staying within the same overall length and width of the button. Keyboards with strong vertical pitch also give you a tactile targeting point, further reducing errors (and the lack of both on the Droid’s slide-out keyboard explains why it’s such an error-prone design, despite the relatively large width of the keys themselves).
With proper pitch, physical buttons as narrow as 9 mm (0.35 inches) can prove surprisingly functional, but for all of this, the minimum width of a standard 12 or 15 key phone keyboard still winds up being 4-5 cm wide (1.6 to 2 inches) and 5-6 cm tall (2 to 2.4 inches).
But what if you want to go even smaller?
Enter an interesting October, 2007 patent from DoCoMo, US Patent 7280101 – Fingertip tactile-sense input device and personal digital assistant using it.
Using a grid of tactile dots much as you would a tiny track pad, it claims to offer a workable way of making the entire control surface of a phone about 22 mm high by 20 mm wide. (.78 inches by .86 inches) — in other words, smaller than a US Quarter.
…and you thought losing your cell phone was a problem now…