Think the Mini Cooper is tiny, check out the Smart Car:
It's 5 feet high, 8 feet long and gets more than 60 miles to the gallon on the highway. A fill-up costs about $11. About 200 people across the country have put their names on a waiting list for the chance to pay $20,000 to get one.
The Mini–though small–still manages to have a rather muscular appearance. The Smart Car, on the other hand, doesn't look much bigger than a golf cart.
The article makes a good point that for some trips you might need a bigger car, but for lots of trips bigger may not be better. In those cases, why waste all that money paying for gas?
I'd still bank on hybrids over ultra-tiny cars. After all, for about the same price you can get nearly 60 miles per gallon and still have quite a bit of room.
(First link via Planetizen)