New Small Ship
This function can be accessed by pressing "G" while in human form, then you must select the option "Create a Small Ship". When you do this, a small armor block will be placed in front of you. You can then build off of this small block.
Size of a Small Ship
Small ships are the fighters and miners of Space Engineers, and essential to the game. They are cheap and easy to build, with the most challenging part the logistics on how to make the aesthetics look and work with the functional parts. Their size enables them to fly through small gaps in asteroids, and dock on larger ships. They can still have some "large" parts, such as a large thruster, and a large reactor, but are prevented from having others. The gravity generator is an example of this, as it can only be used on a large ship, and a space station.