Apple CEO Tim Cook took the stage at Apple's Cupertino campus to introduce a smaller, four-inch version of the iPhone, called the iPhone SE.

The key marketing words for Apple products have usually been thinner, faster, bigger. IPhones have grown up over the past nine years, going from the original 3.5-inch display to the iPhone 6S Plus' 5.5-inch screen. Apple went in the opposite direction and announced a new iPhone that's actually smaller.

Cook also introduced a new iPad Pro, new Watch bands and some software updates. And he kicked off the event by previewing Apple's court battle with the FBI on Tuesday over iPhone encryption..

The 4-inch iPhone SE

The big announcement of the day was the smaller iPhone SE -- a 4-inch iPhone with updated internals.

It looks like the iPhone 5S, Apple's last 4-inch phone released in 2014, but has the same processor and graphics performance as the iPhone 6S. Inside is Apple's A9 chip, which doubles the speed of the iPhone 5S. It can use Hey Siri, the hands-free voice assistant, has a 12MP camera, and shoots 4K video. There is an NFC chip inside so the phone can work with Apple Pay.

The smaller iPhone is an attempt to appeal to fans of more pocketable devices. Last year, Apple sold 30 million phones that were 4-inches and smaller. A chunk of Apple customers have resisted upgrading to the recent 4.7-inch and 5.5-inch smartphones. According to Mixpanel, a third of iPhone owners are still using a device with a 4-inch screen or smaller.

The 16 GB iPhone SE starts at $399 but will be free with a two-year contract or $17 a month on an installment plan. The company will start taking orders for the phone on March 24, and it will be available on March 31.

New 9.7-inch iPad Pro

Apple's other big hardware news is that it took the iPad Pro and make it smaller. Also called the iPad Pro, the new 9.7-inch version includes many of the same powerful features as the larger 12.9-inch Pro model.

Inside is the same A9x chip. The screen is less reflective but brighter and has more color saturation, for all those pros using it as a primary work device. It has a true tone display that measures the color temperature of ambient light with new light sensors and adjusts the screen accordingly.

The smaller iPad Pro works with the Apple Pencil stylus and new line of snap on keyboards the company introduced in with the original iPad Pro. People really like using the cameras on their tablets, for some reason, so the new iPad Pro has a 12-megapixel camera and a LED back-facing flash.

The tablet starts at $599 for the 32 GB Wi-Fi version and $749 for the 129 GB model. In a first, Apple is offering a new larger 256 GB option that starts at $899. It comes in silver, gold, space gray and rose gold.

Apple Watch gets cheaper, more colorful

Apple (AAPL) really wants people to try out the Apple Watch. Tim Cook announced a new line of straps for the wearable, including all new woven nylon bands, a space black Milanese Loop, and additional sport and leather bands in a variety of colors.

Pretty watch straps on their own might not be enough to lure in new customers, so Apple dropped the price of the watch. It now starts at $299.

Why go small? Apple says it sold 30 million four-inch iPhones in 2015, so there's clearly demand for a smaller, cheaper iPhone.

Software Updates

The latest version of Apple mobile operating system, iOS 9.3, is available starting today. Key new features including Night Shift, which adjusts the screen for late night reading for better sleep, and finger print lock for top secret documents in the Notes app.

There is a small update for the Apple TV OS that adds folders for apps and Siri voice dictation.

It also announced a new health-related jSDK called CareKit. It's built for personal care apps. For example, a hospital might make an app to help patients taking the proper steps after a major surgery. The first application is a partnership with major universities and medical centers for monitoring Parkinson's.

Encryption

Before the iPhone SE and Watch announcement, Cook opened with what he admitted is "on everybody's mind": encryption.

"We built the iPhone for you our customers and we know that it is a deeply personal device," said Cook. "For many of us the iPhone is an extension of ourselves."

"We need to decide as a nation how much power the government should have over our data and over our privacy," said Cook. "We will not shrink from this responsibility."

On Tuesday, Apple will face off against the FBI in a California court.

Related: Apple could reveal mini iPhone 5SE on March 21

Apple likes the environment

Apple brought out Lisa Jackson, its vice president of environment, to talk about a new, special Apple employee, Liam.

Liam is a custom robot that takes old iPhones apart to recycle them. While it disassembles them, it detects what components can be reused and recycled. It identifies materials in a device like gold, silver and tungsten. In the future, you might see a Liam robot doing its thing inside an Apple store.

Apple uses 100% renewable power in 25 countries including the US and China. In China, Apple even built a solar farm to accommodate adorable grazing yaks.