Go one step smaller than a bookshelf speaker and you have a satellite speaker (such as the Bose Virtually Invisible Accoustimass cube), a bookshelf speaker with a single speaker driver. The single drivertypically in the 3-inch rangedelivers high and midrange frequencies only. The big drawback is that you don't get much in the way of bass response, so you typically have to pair a satellite system with a separate subwoofer. The satellites deliver the mids and highs; the subwoofer delivers the bass.
The appeal of satellite speakers is quite simplethey're really, really small. You can put these puppies pretty much anywhere, and no one will notice them. So even if you use larger speakers for your front channels, you may want to consider satellites for your surrounds.
Satellite speakers are not necessarily priced lower than bookshelf speakers; in fact, you usually get a bit more bang for your buck by going the bookshelf route. The same dollar outlay will buy you a much better bookshelf system than it will a satellite system.