Apple calls the iPod nano 7 "renanoed", and if you look at the longer, thinner shape, and the wider screen, it's harder to argue the logic than it is the ad copy. It still isn't running iOS, and Apple has rounded the icons to better visually differentiate it from it's bigger, more computer-like cousins, but it does include apps. And buttons. There's a Home button now, also similar to iOS, and a volume rocker with a pause/play control in between. It also has the new Lightning connector, which is why it can be so thin.
Here's a look at the white and (Product) RED versions, and how it compares to the new iPod touch 5, and the iPhone 5.
All shots taken with a Canon 5D Mark III and a Canon EF 50mm f/1.4 USM and an EF 100mm f/2.8 L IS USM Macro lens, embedded at HiDPI for iPhones, iPad 3, and Retina MacBook Pro.