You can have a pretty high end pc in a small package if you go for something like a Lian Li V300 or Silverstone Sugo. Both take mAtx motherboards, so you can fit a nice Core 2 Duo, a decent graphics card (as long as it's not too long, even then it can be made to fit) , a couple of HDD's, even a couple of dvd drives in the V300, a couple of sticks of regular ram and a regular atx PSU (the shorter the better).
Plus you'll still have room for two or three pci cards, such as a tv card and sound card.
You'll be sacrificing some overclocking ability, mainly because the mAtx core 2 duo mobo's aren't so good for high overclocks, plus you don't have quite so much airflow in a small case. But you can still have a more than capable PC.
There are smaller pc's but then you do tend to start using smaller, less powerful psu's, so need less demanding graphics cards (or on board only) Possibly mobile cpu's for lower power consumption and lower temps so the limited cooling can handle it. Laptop style ram, possibly even laptop hdd's and dvd drives. It can be done but if you want the same kind of performance, the price is going to go up.
