The firm's new Mobile Wifi, or 'MiFi', product fits in your pocket and allows up to five devices to connect simultaneously and share the 3G mobile internet access.
The Pay & Go Pocket Hotspot carries the one-off cost of £59.99, and then internet access is offered across a number of different pay-as-you-go payment plans.
Users can pay £2.04 for a daily allocation of 200MB of data, or they can opt for monthly plans of 1GB or 2GB of data, costing £10.21 or £15.32 respectively. There are no long-term contracts with the device, just pay and go.
Gary Booker, the general manager of consumer at O2, said that his company "saw a big gap in the market for a Mobile Wifi package that offered lower start-up costs and competitive data".
"Customers have told us that they want access to the web on the go, but that they don't always want to sign up for year-long contracts or to buy lots of data from the outset," said Booker.
"O2 Hotspot has been designed to cater for exactly those needs: lowering up-front costs and offering customers lots of options when it comes to the amount of data they buy - what they need, when they need it."
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O2's Pocket Hotspot offers 802.11b/g Wi-Fi connectivity and supports maximum download speeds of 21.6 Mbps and upload rates of 5.76 Mbps.
The benefit of using a Mifi device over an individual data plan is that internet can be shared with other devices, meaning users can get additional value from their service.
However, anyone who buys the product will not be able to use it at the London 2012 Olympic Games as wireless access points and 3G hubs have been banned by the organisers.
But Booker feels that Mifi devices will be important in the future as more people want to access the web with their devices while out and about.
"Whether tablet users who want access to the web, gamers who want to carry on playing wirelessly while they're on the move, or business customers who are fed up with slow connections on trains or hunting down the nearest WiFi point, O2 Hotspot is the ideal solution," he said.
"Because you can connect up to five devices at once, we also think that this product will appeal to students who want a fast connection but don't have a telephone line for home broadband or even those who want internet access out of the range of their home router - in the garden for example."
Last month, O2 announced plans to compensate all of its customers in the UK after an embarrassing technical problem left some users of its network without services for more than 24 hours.