Lots of people are coming out with "sensor" stabilization like this:
Pentax 10.2 Megapixel K10D Digital SLR With Built-in Image Stabilization - Gizmodo
But that's not always enough.
Canon says that if you were using a 300mm IS lens and wanted to stabilize using a full-frame sensor, you'd have to move it inches in order to do it. (Wish I could find that link...)
But anyway, if you care about telephoto, you can't really use sensor stabilization. This is why most of Canon's big lenses have their own stabilizer built-in.
If you use a tiny sensor and a normal lens, it does just fine.
Says its from the Canon 400d (XTi) White Paper
and its only 1/4 of an inch,
Hope it helps