I don't get the sandpaper thing. Can someone explain it to me?
It doesn't matter what the resolution screen your finger touches that size is always the same. So Apple defined that no touch interaction should be less than 44x44 points. And then points map to pixels in different ratios depending on dpi etc.
Jobs was saying that on a smaller screen you either have a smaller number of touchable areas or you get small fingers and reduce the 44x44 points number.
So now the proposition is that actually you can make an iPad layout fit in a ~8" screen because the iPad touch targets are a bit bigger than an iPhone anyway, and so you can shrink them a bit (to exactly iPhone size, it turns out) and they will work okay. We'll see.