According to a member of tw.apple.pro, this photo comes from "deep inside the throat"—that's after a Google Translate. It's a 1.2inch x 1.2inch screen. And it's not hard to imagine it as the next iPod Shuffle.
The component is marked "Apple," which may or may not add credence to the rumor, depending on your personal level of skepticism. Personally, I think the part looks pretty believable as most of some future iPod Shuffle (or Nano). But I'm trying to imagine operating a 1-inch touchscreen.
Seriously, mime the use of such a device. You'd have to, like, balance it on your index finger and attempt to pull off surgical maneuvers with your thumb. Or you'd need to use two hands.