This is yet another great concept by Sony. Compare to Nokia's Ngage, its unique design is much more superior (no offense to Nokia). Just take a look at their recent patent filing and it will show you the integration of mobile phone with the PSP.
When the gadget is in its phone manner, all you have is a straightforward mobile phone with numeric keypad, menu and function keys. Twist the screen around 180 degrees, your menu/functional keys is altered into game controls and you have an entirely excellent handy gaming device. I think that this idea would be pretty solid.