Korean Iljin DSP (a subsidiary of Iljin Display_ has had a tiny pocket projector in the works for a couple of years. Now a recent prototype of their mobile phone sized projector appears in an article on the NY Times.

In 2007 Iljin DSP announced deals with France Telecom and Korean carrier SK Telecom to bring their tiny pocket projector to the market this year.
The Iljin "Nano Projector" is battery powered (2 hour battery life) and connects to mobile phones via a standard data cable.
Iljin achieves the miniaturization with their Single-LCD technology, which only uses one glass panel compared to three conventional LCD projectors are using. As light source Iljin uses a combination of LED and Laser.
See also this article on Korea Times form 2007 and the Iljin Display site (Korean).

There are several companies working on ultra-portable projectors: Microvision Pico Projector, Okulon and Texas Instruments.