Apple has upgraded the original white iPod to a version that plays video.
The original iPod now comes in black too
The gadget will be available in the US next week and crams more storage and a bigger screen into a thinner package.
Still mainly a music player, the revamped gadget will have 30 or 60 GB of storage and will be available in two colours - black and white.
Announcing the new iPod Apple boss Steve Jobs said the company had sold more than 28 million iPods since the gadget was launched in 2001.
The revamped video-playing iPod fills out the top end of Apple's family of gadgets. Before now Apple has concentrated on the lower end of the music playing devices with the launch of iPod shuffle, mini and nano.
Mr Jobs said Apple had sold more than one million iPod nanos in the first 17 days they were available. "We could not meet demand," he said.
But this concentration on the lower range had led people to ask about the original white iPod.
"It's been a huge success for us," said Mr Jobs, "and its time to replace it."
In the UK the 30 GB version should cost £219 ($299 in the US) and the 60 GB version £299 ($399). The 40 GB version of the iPod has been discontinued.
The video-playing iPod has a 2.5 inch (6.35cm) colour screen that is 320 by 240 pixels in size.
Mr Jobs said the 30 GB iPod should be able to store 75 hours' worth of video and the 60 GB version twice that. Despite both versions having more storage on board they are thinner than the existing 20 GB iPod.
To give people something to watch on their video-playing iPod Apple is planning to make available more than 2,000 music videos on the iTunes store that will cost £1.89 ($1.99 in the US) each.
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Apple has also set up a deal with US television company ABC to let Americans purchase episodes of shows for $1.99. The shows will be available the day after broadcast. There was no information about when, or if, this service would come to Europe.
The launch of the gadget might help improve sales of full-sized iPods which have been declining thanks to the success of the lower end products.
The video iPod launch also ties in with movie-making tools that Apple bundles in with Quicktime 7 Pro.
Also unveiled at the event was a new iMac G5 that comes with a software package called Front Row that lets users choose the media they want to consume - music, movies or images - via a remote control.
Before the event speculation was rife about what Apple would actually unveil. Suggestions included improved Power Mac and Powerbook computers, tiered pricing on the iTunes store or a Madonna-themed iPod.
The European leg of the event was held at the BBC's Television Centre in London and 600 members of the press from around Europe attended.