If it’s possible to punch a hole in an LCD screen (like smartphones do to accommodate cameras), then several holes can be made to allow physical game controls to peek through a display.
This approach could be done for smartphones or next-gen gaming handhelds (PS Vita 2?), but personally I would be happy if this was a dedicated retro gaming handheld, of which there has been an explosion of new models this past year.
The display would showcase system themes and their corresponding button labels, much like this NEO GEO example:
Button labels could display action-specific labels too (Kick, Punch, Jump, etc.), and emit animations when pressed. Would make for a very dynamic gaming experience.
I might do another version of this with analog sticks if there is any interest out there. My plan is to incorporate trackpad controls like those found on the Steam Controller, as that would maintain a thin profile over protruding sticks.