Pocket carry
I pocket-carry a Kel-Tec P32 every day in South Florida. The Kel-Tecs are fantastic for pocket carry and I would highly recommend them to anyone who is going to conceal.
If you live in Florida or somewhere else hot anything larger just isn't practical. If you live where its a little cooler, the Kel-Tec would still make a great backup.
I've read that some people have had issues with Kel-Tecs, but mine has been great so far--I only have about 50 rounds through it, but its been 100% (many of my higher end guns didn't do that well during the break-in period).
I got the P32 to avoid having to buy another caliber (already owned .22, .32, 9mm and .45ACP). If that wasn't an issue for me, I would have probably gone with the P3AT (.380).
If you're patient, they also have the PF-9 in 9mm coming out in August, I believe. A little smaller than a Kahr PM-9 but a whole lot less expensive.
The Kel-Tecs are so reasonably priced you could get another gun and still be in your budget. I you went this route, I would recommend the Ruger P345. You can get them in the $400's and it's been extremely reliable and a lot of fun to shoot. Wouldn't want to try to conceal it, but its a great house/car/range gun.
There is also another company, Skyy Industries, that has a extremely compact 9MM called the MPX-9 coming out later this summer. I've never owned a SKYY product, however, so I can't speak to their quality or reliability.
If you're willing to blow your budget there is also the Rohrbaugh R-9. Size is similar to the upcoming Skyy MPX-9 but the best price I've seent is over $900.00. I've read excellent things about these little guns but the price is a little rich for my blood.