Use a combination of lmodern and slantsc to obtain slanted small caps:

\documentclass{article}
\usepackage{lmodern}% http://ctan.org/pkg/lmodern
\usepackage{slantsc}% http://ctan.org/pkg/slantsc
\begin{document}
\renewcommand{\arraystretch}{1.5}
\begin{tabular}{ll}
\verb!\textsc{Hello world}! & \textsc{Hello world} \\ % Regular Small Caps
\verb!\textsl{Hello world}! & \textsl{Hello world} \\ % Regular slanted
\verb!\textit{Hello world}! & \textit{Hello world} \\ % Regular italics
\verb!\textit{\textsc{Hello world}}! & \textit{\textsc{Hello world}} \\ % No italic small caps exist, this is substituted for default font
\verb!\textsl{\textsc{Hello world}}! & \textsl{\textsc{Hello world}} % Slanted small caps
\end{tabular}
\end{document}
If you're specifically after italic small caps in Times font, consider reading
http://homepages.inf.ed.ac.uk/sterratt/progs/italic-small-caps-times-latex
The above source provides times-itsc that you could use instead of \usepackage{times} to produce italicized small caps.
\textscnottextsf– Seamus Oct 28 '11 at 7:27