Power consumption is the other major consideration.
Smaller laptops are only made possible by smaller batteries. In turn, smaller batteries only make sense if the components of the laptop draw less power. After all, laptops are supposed to make our lives easier and having to recharge them frequently is not part of that game plan. Intel's task was not just to bring faster CPUs to laptops, but also to do so in a way that the chip would consume less power. For example, the new top of the line mobile Pentium III runs at 1GHz and consumes 1.7V when running off AC power but will dynamically throttle the chip to 700MHz while consuming only 1.35V when running off the laptop's battery.