According to Washingtonpost, Apple might be announcing the new cheaper model of iPhone at the Moscone Center in San Francisco next week. The announcement also includes the new iPod with built in WiFi and touch screen.
WashingtonPost:
If documents prepared by an Apple partner and obtained by The Washington Post are to be believed, both of those products are in the works and slated for release in the coming months. One would be an iPod with WiFi and a touch screen like that on the iPhone; the other would be an iPhone Nano priced lower than the cheapest iPhone, which sells for $500.
[Source: Slashphone]