iTech Deals offers this USB Spy Pen Digital Video Camera for $11.99. Coupon code "DNPEN9" drops that to $8.99. With free shipping, that's $41 off list and the lowest price we could find. This ink pen features a 0.25" CMOS sensor, 720x480 video resolution, 1280x960 photo capture, and microphone.
Note: It's unclear what internal storage this model has, but similar models elsewhere with the same exterior (but lesser or greater resolutions) have either 4GB or 8GB.