The layman answer is that they had to fit bigger “computers” into them. An actual computer scientist should probably explain transistor technology, but a computer is essentially millions of calculators talking to each other. A technology has advanced, each calculator has become smaller and more efficient, which means you get more power and lighter parts. In different generations of computers, manufacturers hit a point where they just put more calculators in the computer to make it stronger, just as you put in more ram chips.
Then there’s also battery packs that have become more efficient and smaller, as well as cooling systems. A ton of new materials have come out that are more efficient at transferring heat and are lighter, so everything has continued to get smaller and lighter.
Your iPod was able to be so small because it doesn’t take much effort to play an mp3, but those mp4’s actually strained the hardware and cooling capabilities, which is why they got noticeably hotter when playing a movie.
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