According to a report from Reuters, Masaya Maeda (the head of Canon's Image Communications products divison) is quoted as saying that Canon are working on a smaller digital SLR. This is in response to smaller interchangeable lens cameras from Sony, Olympus and Panasonic, such as the Digital Olympus Pen and other micro 4/3 mount mirrorless cameras.
Additional comments suggest Canon may not be going for a mirrorless design. For example Masaya Maeda is quoted as denying that making a smaller camera without a mirror would be difficult and also that a smaller camera does not necessarily mean a mirrorless design.
This is interesting from several points of view. It raises the question of whether Canon might be going with a new lens mount to take advantage of a much thinner body. On the other hand it's rather difficult to see just how the Rebel series cameras could be made much smaller. It's already the case that most lenses contribute a significant amount to the size and bulk of the camera. There's no point in having a camera the size of a credit card if you're going to mount a large lens on it. It still won't fit in your pocket. With the current back focus distance of 44mm for the EF and EF-S series lenses, that would seem to put a minimum depth of about 2" on any camera body using those lenses, even with a complex and space saving reflex mirror design. The current Rebel series camera bodies are already small enough that they aren't as easy (for me) to hold as the 50D/7D series. Still, Canon aren't making a camera for me, they're making a camera which will appeal to the general consumer market. The current Rebel T2i is 3" deep, so I guess there is room to make it smaller.
Probably the most logical move would be a new lens design to go along with the new DSLR. If not constrained by the back focus distance of EF/S series lenses, you could probably make an optical reflex design APS-C sensor camera that was about 1" thick if you were clever with the mechanical design of the mirror box and shutter. You could then have a line of smaller "pancake" type lenses (plus of course an adapter for EF and EF-S lenses). That way you could have something significantly smaller than the current Digital Rebel series cameras.
The classic film analog would be the old Olympus Pen F SLR. It was a half frame camera (18x24mm), but that is still slightly larger than APS-C, so with current technology it should be possible to make an even smaller optical reflex viewing APS-C digital SLR. Olympus used a clever mirror system which flipped sideways (since the default format was vertical/portrait) and removed the pentaprism hump by using a porro-prism/mirror viewing system. I'd guess that Canon could do something clever in that regard too.
So it will be interesting to see what Canon come up with. There's no clue as to when any such sub-compact interchangeable lens camera might be announced. I'd guess it's not years away given the speed at which the market moves, plus I doubt Canon would talk about something unless they had done most of the R&D work already. There's no point in tipping off your competition about what you are doing. Maybe later in the year we will see a more concrete announcement from Canon.