SAN JOSE (CNN/Money) – Sony's still not ready to share all the details about its entry into handheld gaming, but it has been offering some intriguing hints over the past few days. And while games will be the primary focus of the PSP, don't be surprised when this thing turns out to be as big a Trojan horse as the PlayStation 2.

Let's step back a bit first: Most people look at the PS2 and don't see it as much more than a video game machine. But as Sony and Microsoft (MSFT: Research, Estimates) wage war for control of your living room, the PS2 and Xbox are slowly getting consumers used to the idea of an all-in-one multimedia device. The reach of both machines extends beyond games. Both act as DVD players, will play CDs, give you an in-home karaoke machine and allow you to go online (though, at present, only to play games). With the PSX, Sony also offers Tivo-like functionality

Those things are side features now, but they're helping position the PS2 and Xbox to become the dominant entertainment device in your home -- with perhaps the exception of your television.

Sony's PSP

So how does this get us to the PSP? The device is, obviously being pitched as something for gamers. Early footage shown at the Game Developer's Conference here in San Jose this week looked pretty good and is certainly much more graphically advanced than anything the Nintendo Game Boy or other handheld systems have been capable of.

But as Sony executive vice president Andy House was talking up the gaming features of the PSP he also mentioned a few features that extend well beyond gaming.

Some of these are already known: The PSP will play digital music and movies. And with its 16:9 ratio screen (essentially, widescreen in the palm of your hand), watching films could be a heck of a lot of fun -- especially for travelers.

Other features are new -- though hardly surprising.

The PSP will also be able to communicate with the PS2 and, eventually, your home PC. House made it clear Sony was interested in including PDA functionality down the road, which would definitely move the device out of the pure entertainment space. Two-way communications with the PC opens up a world of other possibilities as well, so don't be too surprised if eventually (likely in a second or third generation), the PSP is also marketed as a full-featured handheld PC.

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Sony representatives said the company is also "very interested" in possibilities the PSP offers as a global positioning system (GPS) device.

House shot down rumors that Sony (SNE: Research, Estimates) has dropped the PSP's wireless features, stating emphatically that the device would ship with embedded 802.11 technology. That will allow PSPs to communicate with each other in close range, though he stopped short of saying whether users would be able to utilize existing wireless networks to play against friends across the country.

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At its launch, though, the PSP will be pitched as nothing but a game machine. And developers are lining up to support it. Chris Charla, senior producer at Backbone Entertainment, makers of the upcoming game "Death Jr.", said "polygon for polygon, the PSP actually has more power than the PS2."

Seeing as it was given as part of a keynote address sponsored by Sony, that's likely hyperbole. That said, game footage shown at the keynote and a later seminar was very impressive. The PSP's graphics fall a bit short of what the PS2 is capable of – but it was worth noting that Sony opted against showing a AAA title here, holding those instead for the PSP's official roll-out at E3 in May.

Other developers working on PSP games, though, confirmed the system is very easy to write code for. As of last fall, 89 companies had received the emulator kits allowing them to begin writing software for the device.

That's a sizable number – and it's a strong sign that Sony intends to offer a fierce fight for the handheld market. But to assume the company only wants to beat handheld market leader Nintendo is a mistake. Sony's ambitions for the PSP are much, much bigger.  

Morris is Director of Content Development for CNN/Money. Click here to send him an email.