I don't know if this camera is really the smallest spy camera on the planet -- I'm sure I saw a smaller one at the spy museum in Washington, DC (though made in the days before digital cameras). But the CAM-007 is really small, at just 18 grams, tiny enough to slip into a pack of cigarettes or a bubblegum wrapper (or a little clutch bag or pocket). The camera's battery charges via USB, and you can record two hours of video (at 15 fps) on a full charge. The 1GB micro SD card holds 19 hours, and you can play back the MPEG-4 recording on a 3G mobile phone.

At $349, it's a little pricey as a novelty toy to have lying around just for fun, so I'm guessing the target buyer is someone who actually wants to spy on people.

Via Trends in Japan - the CAM-007 is available at their online shop.