On phones like the Nexus One and Nexus S, the "hardware keys" are raelly just an extension of the touch screen, so the phone uses "haptic feedback" to vibrate the phone when you trigger those keys. I actually like it even better than the hardware keys on my old G1 or on any of my friends' phones since then.
Extension in that they are "smooth", but physically, they are separate pieces of hardware (the light intensity of each can be set independently for instance).
