Its finally no longer a rumor to be denied by every Sony exec on the planet, the slim is real and only $299!
http://blog.us.playstation.com/2009/08/18/playstation-3-now-299-slimmer-version-coming-september-1st/

That thing is HUGE!
For the Playstation fans - are there any good racing games for the console (that is, comparable to Ridge Racer V for PS2 - one of my favourite games evar!), and is there a VGA adapter available it? I'm not really wanting to buy a TV just for that, but a couple of my monitors have a free port, and that thing is a bit interesting even though I'm a pretty hardcore PC guy.

That's great news, the slim will be the first console I buy since the n64.

don't, it's literally stripped of features, and with the regular sized one's costing the same as the slim now, just buy the regular one.

Stripped of features?

Stripped how? As far as I can tell it's the same as the 80GB model feature wise.

Its identical to the 80GB one, except for the reduced form factor, reduced power consumption, increased HDD size (120GB) and only two USB posrts instead of 4. If that's stripped of features...

No linux install.
EDIT:
atari lynx
http://www.joystiq.com/2009/08/18/ps3-slim-drops-optional-os-install-feature/

What about the slim version's backward compatibility with the PS2? Does that remain or is BC completely left out?

Well, I thought no linux install was huge, because without linux you won't be able to watch netflix.
Anyway, you ALSO will be missing out on the memory card ports for the ps2.
I think the reduced price fat ps3 that has the 120gb is a much better deal, simply because they didn't cut any features and you will still be getting ps2 emulation. Fatty McFatterson, welcome to my shelf, ye olde Xbox has been replaced.

No BC with PS2 games, but for some reason it still has BC with PS1 games, same as the current "big" PS3's.

There is no reduced price 120GB model. In fact, there is no 120GB model other than the slim. Not to mention, none of the current fat PS3 models have any backwards compatibility anymore, the software compatibility was (or soon will be) disabled with a firmware update. You have to find the really old hardware compatible ones on E-Bay to get that now.

Ok, first of all none of the PS3's ever had PS2 memory card slots, that's handled through software and virtual memory cards. What some of the versions did have was a Flash Card reader that supported "SD/MultiMedia Card, Compact Flash Type I/II, Microdrive, Memory Stick/PRO/Duo".
As for the differences in the various versions, read below. (NTSC versions only, not going to list PAL)
20GB (2006 version)
USB Ports - 4
802.11 b/g - No
Flash Card reader - No
SACD - Yes
Backwards Compatibility - PS1 & PS2 (Hardware)
60GB (2006 version)
USB Ports - 4
802.11 b/g - Yes
Flash Card reader - Yes
SACD - Yes
Backwards Compatibility - PS1 & PS2 (Hardware)
40GB (2007 version)
USB Ports - 2
802.11 b/g - Yes
Flash Card reader - No
SACD - No
Backwards Compatibility - PS1
80GB (2007 version) (CECHExx Models)
USB Ports - 4
802.11 b/g - Yes
Flash Card reader - Yes
SACD - Yes
Backwards Compatibility - PS1 & PS2 (Software)
80GB (2007 version) (CECHKxx and CECHLxx Models)
USB Ports - 2
802.11 b/g - Yes
Flash Card reader - No
SACD - No
Backwards Compatibility - PS1
120GB Slim (2009 version)
USB Ports - 2
802.11 b/g - Yes
Flash Card reader - No
SACD - No
Backwards Compatibility - PS1
Alternate OS - No
There you go... most features? Original 60GB version.

The old PS3 will be getting a price drop.

You can watch Netflix on a PS3 with the PlayOn program. It's a small price to pay for never having to use Linux.