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 1.2-inch x 1.2-inch 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 rumour, depending on your personal level of scepticism. 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 one-inch touchscreen.