Sony Ericsson’s Playstation Phone is looking pretty real in photos posted by Engadget. Josh Topolsky’s not saying how he got the photos, or whether he’s actually seen the device, but he assures that it’s an authentic prototype, with the final product potentially coming this year, or more likely in 2011.

As previously rumored, the Playstation Phone is an Android handset with game controls that slide out from the bottom side, kind of like the PSP Go. There’s a directional pad, face buttons and shoulder bumpers, plus a multi-touch track pad, which I’m guessing will act in place of analog thumbsticks. Specs include a 1 GHz Qualcomm processor, 512 MB of RAM, 1 GB of ROM, and a screen size of 3.7 to 4.1 inches.

The hardware looks pretty good, but hardware isn’t what will make or break the Playstation Phone. Software will be crucial, and we still don’t know much on that front.

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Sony’s Playstation is making me feel pretty old today, the 15th anniversary of its North American launch. The original Playstation console was released stateside on September 9, 1995. I remember getting one shortly before summer camp, and not wanting to be yanked away.

The milestone comes at a time in the Playstation 3′s console cycle — four years deep — that we usually start hearing about the next generation. But Sony, like its rival Microsoft, is keeping mum, and digging in for the long haul with new technology for the PS3.

One big push for Sony will be 3D, a source of excitement for the electronics industry, but also one of skepticism. The Playstation 3 is moving ahead with 3D gaming as Microsoft carefully waits for 3D adoption to grow (red-blue glasses experiments on the Xbox 360 aside), and Nintendo focuses on the glasses-free 3DS handheld.

Then, there’s motion control. The Playstation Move wand, however more accurate and capable than Nintendo’s Wii, is unquestionably “me-too” technology, and Sony’s goal of bringing motion control to enthusiast gamers is a risky undertaking. As I’ve said several times before, the starting lineup of games for Move and Microsoft’s Kinect aren’t miles ahead of what Nintendo has already done, despite the fancier technology behind them.

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From the Nintendo era onward, the vast majority of video game controllers have named their face buttons after letters in the alphabet — almost always picking from A, B, C, X, Y and Z — with the exception of the Sony Playstation and its progeny.

I never thought to question the Playstation’s combination of square, circle, triangle and X, but the folks at Famitsu magazine did. 1UP relays the magazine’s conversation with Sony designer Teiyu Goto:

We wanted something simple to remember, which is why we went with icons or symbols … I gave each symbol a meaning and a color. The triangle refers to viewpoint; I had it represent one’s head or direction and made it green. Square refers to a piece of paper; I had it represent menus or documents and made it pink. The circle and X represent ‘yes’ or ‘no’ decision-making and I made them red and blue respectively.

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The folks at Sony Ericsson had a novel idea, according to Engadget’s tipsters: Build a smartphone running Android 3.0, add a sliding set of game controls instead of a physical keyboard, open a section of the Android Market specifically for this phone’s games, and put the weight of Sony’s Playstation brand behind it. And just like that, the PSP Phone has its most credible rumor yet.

Engadget’s Josh Topolsky says Sony Ericsson’s gaming phone could arrive as early as October, which means we’ve got a few months to speculate wildly on the missing details (the image here is just a mockup). Here’s what I would like to see in the fabled Playstation phone:

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Sony’s got big plans for the Playstation brand, reports the Wall Street Journal, whose anonymous sources say a phone and tablet that run Playstation games are in development.

The prevailing thought is that these devices will compete with Apple’s iPhone and iPad, but that seems too obvious. All high-end smartphones and tablets are competing with the iPhone and iPad to some extent. The main target here is Microsoft and the Xbox brand, or at least it should be.

When Microsoft announced Windows Phone 7 Series, the gamer in me loved hearing that Xbox Live would play a role. We’re short on details, but Microsoft has at least confirmed that its WinPho7 phones will play some Xbox Live games. Depending on how Microsoft plays it, this could be the company’s first major foray into portable video games.

Meanwhile, Sony has repeatedly insisted that Apple isn’t a gaming competitor, as if iPhones exist in some bizarro market that isn’t stealing Sony’s business. It’s a hollow argument, but one that I’ve already refuted to death. If I was a Sony executive, I’d at least be worried about Microsoft.

To put all this another way, there’s a good chance the console wars will spill over to mobile phones, and that’s a good thing for gamers. It’s about time Sony’s gaming division and Sony Ericsson stopped pretending the other one exists (I know, the Sony Ericsson Aino has PS3 remote play, but not for games).

Just one question: If Sony’s planning on bringing Playstation games to a tablet and smartphone, what does that mean for sweet, sweet buttons?

One of the most cherished Sony rumors surfaced again over the weekend, as Nikkei reported that the company is considering a cellphone and video game hybrid.

Rumor has it that Sony could bring together a project team as early as July to combine functions of an Ericsson phone with Sony’s gaming devices. Reuters, which spotted Nikkei’s article, didn’t use the “Playstation Phone” terminology, but that’s what everyone’s thinking. This is particularly interesting given that Sony refused to license the Playstation brand to Ericsson on a previous occasion because the technology wasn’t there.

So is the rumor true? It’s certainly not impossible, but all the retellings of this report missed an interesting tidbit from a week ago: Sony is already planning to integrate Playstation with an existing touch screen phone, the Satio.

Speaking at a press conference in Singapore, Hirokazu Ishizuka, head of Sony Ericsson’s Asia Pacific Region, said that “you can enjoy your PlayStation games so therefore this product is so powerful and we are very confident [of] this product’s success.” The report by ABS-CBN didn’t elaborate further except to say that gaming is part of a larger multimedia platform for the phone, which is due in about six months.

It’s not clear exactly what Ishizuka meant by his statement. We know the Satio’s PlayNow arena is a robust multimedia service, but it remains to be seen whether any Playstation branding will creep in.

ABS-CBN’s report would be perfect if Ishizuka was talking about the Aino, another Ericsson phone notable for its ability to remotely stream music and vidoes from a connected Playstation 3. Alas, we’ve got two phones that would for all intents and purposes be a Playstation Phone, if only they were mashed into one.

Responding to the unfavorable economic environment, Sony is slashing the price of its PlayStation 2 gaming console to under $100. The price cut is also aimed at luring new gamers to the venerable platform, extending the PS2′s life cycle for the foreseeable future.

Aside from competing on price, the PS2 has a solid library of games and thriving aftermarket of accessories and used games. If I were a parent choosing between a PS2 and PS3, I’d opt for the lower-cost alternative, because it’s good enough.

When my grandfather was a child during the Great Depression, he received hand-me-down clothes to wear from his older brothers. When his shoes did not fit, he wadded them full of paper. Kids today can wait a few years, or mow some lawns to buy themselves a PS3.

I’d also make a bet that PS2 owners that have upgraded to PS3 still play some of their old games, because there are some great titles. Simple platforms such as Nintendo’s DS and the iPhone sell games, because the games are good. The latest and greatest isn’t always what people want to buy.

It’s great the Sony is capitalizing on its asset rather than abandoning a still lucrative platform. It’s good business, and it’s a great value for customers. That, and an excuse for me to tell curmudgeonly tales.

Big 5Words news coming tomorrow!

Skype for iPhone now available.

Google gets into venture capital.

American Airlines: Wi-Fi almost everywhere.

Sorry, no Android tethering, please.

Microsoft announces Windows Phone partners.

Ahoy, matey: iPhone app pirates.

Lauren: happy PC? Can’t say!

Shure’s new headphones: they rock.

A cheaper PS2. Starting tomorrow.

Firefox is top European browser.

Netflix raises price for Blu-Ray.

Here’s a statistic that’s bandied about by game industry cheerleaders: roughly 40 percent of U.S. homes own a video game console.

It’s also a figure that will likely be loathed by cable providers if more streaming video Web sites follow YouTube’s lead. Yesterday, Google’s video juggernaut launched a sleek interface for the PlayStation 3 and Wii. It was as good a reason as any to dust off Nintendo’s waggle box, so I checked it out. The service is basically what you would expect and hope for–a browsing and viewing experience that’s tailored to the size of your television screen. A similar channel is already available for TiVo owners.

Of course, YouTube is best for short bursts of random entertainment, and it only makes me yearn for support of a full-featured TV Web site, like Hulu or TV.com. See, I recently gave up cable to find out how much content I could replace with the Internet (and I’m not alone). As a cost-cutting measure, it’s great, but running an RGB cable between my computer and laptop isn’t ideal when I just want to lounge on the couch.

Solutions are on the way, like media streamers and possibly HDTVs that can support Hulu, but that requires an extra purchase. If you’re among the 40 percent that already has a gaming console, chances are you’d want it to be the hub for streaming Internet television instead of something extra. There is a utility called PlayOn that lets you watch Hulu and other sites on the Xbox 360 and Playstation 3, but it requires a computer as the middleman. This can get clumsy if your wireless Internet is on the spotty side.

There’s been some hinting at integration with streaming TV Web sites, at least for the Xbox 360. Here’s hoping it actually happens.

I can be sarcastic in a headline, right? No matter, retail research firm NPD released last year’s video game sales data today, revealing–of course–that Nintendo’s Wii console and DS handheld were the big winners.

Perhaps there’s some surprise in knowing the DS was the most popular last-minute holiday item, selling 3.04 million units to the Wii’s 2.15 million units in December. Microsoft’s Xbox 360 came in second place, selling 1.44 million consoles last month. Sony’s PSP handheld sold 1.02 million units in December, besting the Playstation 3′s 726,000 units.

Overall, sales of video games, consoles and related products in 2008 rose 19 percent from the year before. I was going to break out the calculator, do some research, and compile a list of total 2008 console sales, but realized the kind folks at Video Game Sales Wiki already took care of that, so here are the numbers:

Wii: 10,151,000

Nintendo DS: 9,951,100

Xbox 360: 4,735,400

PSP: 3,829,600

Playstation 3: 3,544,900

With everything laid out like this, the 1.2 million unit difference between the Playstation 3 and the Xbox 360 isn’t so bad, especially when you consider how handily the Wii stomped both of them.

As for games, Wii Play and its bundled Wii Remote was the top seller of 2008 — you’d know this by standing in a GameStop and seeing the employees pitch it to everyone buying a console — with Mario Kart Wii and Wii Fit taking silver and bronze respectively. Careful, though, because NPD’s counts the same game separately when released for more than one console. Add Grand Theft Auto IV’s PS3 and Xbox 360 sales together, and it’s actually in second place overall.

NPD Analyst Anita Frazier noted that most of the best-sellers were released long before the holiday season. “Get some high profile releases out in the first and second quarters,” she suggested. Some publishers are taking this advice to heart, with big name titles like Lord of the Rings: Conquest and Halo Wars being saved for the first quarter of 2009.

Frazier also noted that as the economy melted in the fourth quarter, people kept buying games. Add that to the list of unsurprising revelations of 2008.

If you haven’t been following the controversy over the PlayStation 3 killer app LittleBigPlanet, here’s a primer:

Sony recalled the game, which was due out this week, because one of its background music tracks quoted the Quran. It’s not a forbidden practice under Islamic law, but it does risk offending some Muslims. Sony expects to have an edited version of the game back in North American stores on October 27.

The surrounding brouhaha can potentially go in all sorts of directions, and the media and blogosphere have examined most of them. Edge magazine quoted Dr. M. Zuhdi Jasser, the head of the right-wing Muslim group American Islamic Forum for Democracy, as decrying the ban, while MTV’s Stephen Totilo talked to the more established Council on American Islamic Relations, which commended Sony for its efforts. He also asked experts if the reaction to the track could match the Danish cartoon controversy (it won’t) and got a statement from the musician, Toumani Diabate (he’s a devout Muslim). And of course, Sony’s motivations have been questioned, as the company loves the Middle Eastern market, and is no stranger to past religious foibles.

But one still-unexplored angle was brought to light by a commenter in Totilo’s article, who agrees with the song’s ouster because “religions create social boundaries, LBP is meant to have none.” And that really begs the question: Do religious themes, symbols and texts have a place in secular video games? Or are other mediums better-equipped to address religion’s subtler points? (I’m not talking about Left Behind and other overtly faith-based titles.) This situation is an opportunity — albeit less-sexy than the controversy itself — for a discussion on the subject. Let’s not waste it.