Wow. Original games that did this would be awesome. You could take advantage of the physical positions people would have to adopt to play, holding the device together, shoulder-to-shoulder.
I've seen some arcade and indie multiplayr games that put focus on the physical space like that. There was one ridiculous one where up to four players are each given a button on the keyboard to press, and whoever holds their's the longest wins, and...that's it. No holds barred. Punch your friends in the face: it's art!