This measuring system is a leftover from the days
of video TUBES and has nothing to do with the surface area of the
chip in a direct sense. The Edmund Scientific Optics catalog has
a sidebar that completely backs up the idea.
For instance, a "one inch" chip has a 16mm diagonal
sensor array. A "one half inch" chip has an array of only 8mm in
the diagonal. This means that the 1/1.8 = 0.555 inch measurement
means NOTHING about the sensor array size. Unless they have changed
the entire measurement system just for this chip, the actual sensor
patch is 11% larger than the 8mm of a 1/2 chip or 8.88mm in diagonal.
(Mark Schubin of Videography Magazine)
From: http://www.dpreview.com/reviews/CanonDigitalIXUSV/ Item May Only be Printed for Home/Personal reference