This is a rather interesting topic because the word on the street varies widely from the medical consensus. Here is a stab at why that is the case:
1) The penis (actually the nerves connected to the penis) is traumatized by the surgery. Even if everything is intact, it takes a long time (multiple months, sometimes years) for the nerves to return to more normal function.
2) Since some of the nerves are right on the surface of the prostate, even the best "nerve-sparing" surgery will likely damage some of the nerves. By damage here, I don't just mean "trauma," but rather that the nerves may actually get cut, broken, or whatever, and no longer send signals (thinking of them like electric wires.)
3) When the prostate is removed, the connection between the bladder and the penis is cut and then reconnected. The difference in "length" is miniscule, so while this is true, it is not what we're all noticing.

So, my penis looked like a scared rabbit (metaphorically speaking) after the surgery, but now as I approach two years since surgery it looks a lot more like I remember it a lot more often. For a while, I had a hard time getting it to relax enough and have enough blood flow to pee standing up, even though I follow my physical therapist's advice to drink large quantities of water daily.

My friend who had first prostate cancer and now bladder cancer (over many years) says his situation is much worse.

So that's the story. It may not be physically shorter and smaller, but shorter is a reflection of the nerve status and smaller is a reflection of the blood flow, and it all interacts. Drugs like cialis and viagra work by increasing blood flow based on a chemical reaction involved, and they are often prescribed after prostatectomy to help with the recovery process. Less commonly, vacuum devices or a physical tensioning device (RestoreX) may be used to help get blood back into the penis during the months long recovery period after prostatectomy. This is because if the "smooth muscles" in the penis atrophy for too long, it can be difficult for them to recover, so all three of these strategies are designed to keep those muscles from wasting while the nerves recover.