It's a Stylophone Retro Pocket Synthesizer (although whose pocket it will fit in, I'm not sure). Originally produced in the late 60's as a toy, the stylophone eventually found it's way into recording studios as an instrument of sorts. It's seen such use in recent years by The Raconteurs and The Greenhornes.
History aside, this guy is fun.
And if you know a guy, chances are he'll have fun with it, too. We found it on sale for $9.99 at UO. You can also purchase one for $18.99 on Amazon.
Below are a few other items making a resurgence:
Instant cameras (available here; image via).
Nesting dolls (available here).
Snail Mail (available anywhere, image via).
I need to work on that last one...