By Dan Gallagher

Sony Corp. (SNE) launched a new handheld video game device Tuesday that will eschew traditional disks and game cartridges, allowing games to be downloaded exclusively through a wireless connection.

At a press conference during the Electronic Entertainment Expo, or E3, in Los Angeles, Sony (SNE) lifted the wraps on the PSP Go, which is set to launch this October.

"Allow me to introduce the worst kept secret of E3," joked Kaz Hirai, president and chief executive of Sony Computer Entertainment of America, making light of the fact that pictures of the device had been leaked across the gadget blogs before the event.

Hirai said Sony will continue to sell its current handheld, the PSP 3000. The new device "is for people who are already living the digital lifestyle," he said.

The PSP Go is 50% smaller than the existing PSP, and 40% lighter. It has 16GB worth of memory to download and store games, movies and TV shows that users can purchase through the company's PlayStation Network.

The device marks another step for the video game industry into the model of digital distribution. Most video games are traditionally sold on laser discs through retailers, but console manufacturers have been developing alternative models based on gamers downloading content directly from the Web.

Sony's rivals - Microsoft Corp. (MSFT) and Nintendo (NTDOY) - also offer services to download games, though none makes a device that relies on downloads exclusively.

Another new competitor in the market is Apple Inc. (AAPL), whose iPhone has become a popular gaming device thanks to the many games available over the company's App Store.

The PSP Go is slated to launch on Oct. 1 at a retail price of $249, Sony said.

-Dan Gallagher; 415-439-6400; AskNewswires@dowjones.com