Updated from 8:12 a.m. EDT

The Neonode N2 is a very small, very cute cell phone. That's basically all you need to know.

I could tell you it's a world phone that sports a very clever touch screen to handle everything from dialing the phone to surfing the Web. It takes a minute or so to figure out how to use its clever navigation system. But once you do, using the N2 is fun.

Its compact size allows you to conveniently slip it into just about any size pocket or purse. There's a miniSD card inside that lets you store up to 4 GB of music and stuff. There are also two holes on the bottom that let you wear your Neonode phone around your neck, belt or even on a keychain.

Everyone -- and I mean everyone who has seen it -- must touch it to see if it's real. Invariably, they ask where they can get one. I promise I'll tell you in a minute.

But again, all you really need to know is that the N2 is a very small, very cute cellphone.

The N2 is made by the Swedish company Neonode ( NEON). It also makes the incredible touch-screen technology that powers the phone.

zfiorce

ZForce is the official company name for its touch-screen technology. By moving a finger across the phone's screen you can navigate forward, back, up and down between applications. You can also tap on the screen to dial a phone number. You are rewarded with a tactile buzz/vibration from the entire phone when you press an on-screen key -- a nice touch (pun intended).

Neonode's touch-screen system, named zForce, looks similar to Apple's ( AAPL) iPhone or HTC's Touch handset -- but it's entirely different. Instead of capacitance or resistive, zFioce is based on optical technology. You don't have to physically put pressure on the screen -- you just need to get close enough to run your finger over it. I would expect that other types of portable devices would benefit from this invention too.

The handset measures all of three inches by 1.75 inches by 0.63 inches and weighs almost nothing. It's easy to forget you have it in your pocket until it rings and vibrates. Inside there's barely enough room for your SIM card, the miniSD memory card and the battery (which is glued onto the back cover.)

It may be tiny, but there are features that rival larger phones -- including a two-megapixel camera on the back and Bluetooth wireless technology.

N2 is a quad-band GSM/GPRS phone. That means it can be used nearly everywhere on the planet. It also means that data reception will be slow. GPRS is a 1G to 2G system -- slow, but unlike higher-speed networks it's available everywhere the phone can receive a signal. It's fine for text messaging.

My sample came with a European AC adapter as well as a USB cord. Both can be used for charging. During my time with the N2, I found that the battery lasts for three to four days before needing a charge. Very cool.

The USB cord also allows the phone to synch with your PC via Microsoft ActiveSync software. It was nice to have the N2 get all my calendar appointments and phone numbers from my office Outlook account.

In my tests, the Neonode did everything I asked of it. While the listening volume seemed a little low to me, I was able to actually hear everyone I called -- and vice versa. Surfing the Web was predictably slow. It's a challenge to navigate a Web page on such a small screen -- but it can be done and it's kinda fun to read breaking news on such a cool device.

Currently, the N2 is only available for sale in a few select markets (mostly European). Neonode is working on teaming up with a U.S. cellular provider -- hopefully with an announcement coming soon.

Until that happens, the N2 is available, from Britain, on their Web site for a whopping $606. I know that's steep. But a large percentage of the people who've seen this phone -- and who want to buy it -- were not phased by the high price.

Neonode is also working on a new, larger phone with lots more features.

I'll bet it will be a winner too.

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Gary Krakow is TheStreet.com's senior technology correspondent.