We describe a new instrument that forms the core of a long-term high contrast imaging program at the 200-inch Hale Telescope at Palomar Observatory. The primary scientific thrust is to obtain images and low-resolution spectroscopy of brown dwarfs and young Jovian mass exoplanets in the vicinity of stars within 50 parsecs of the Sun. The instrument is a microlens-based integral field spectrograph integrated with a diffraction limited, apodized-pupil Lyot coronagraph, mounted behind the Palomar adaptive optics system. The spectrograph obtains imaging in 23 channels across the J and H bands (1.06 - 1.78 microns). In addition to obtaining spectra, this wavelength resolution allows suppression of the chromatically dependent speckle noise, which we describe. We have recently installed a novel internal wave front calibration system that will provide continuous updates to the AO system every 0.5 - 1.0 minutes by sensing the wave front within the coronagraph. The Palomar AO system is undergoing an upgrade to a much higher-order AO system (PALM-3000): a 3388-actuator tweeter deformable mirror working together with the existing 241-actuator mirror. This system will allow correction with subapertures as small as 8cm at the telescope pupil using natural guide stars. The coronagraph alone has achieved an initial dynamic range in the H-band of 2 X 10^-4 at 1 arcsecond, without speckle noise suppression. We demonstrate that spectral speckle suppression is providing a factor of 10-20 improvement over this bringing our current contrast at an arcsecond to ~2 X 10^-5. This system is the first of a new generation of apodized pupil coronagraphs combined with high-order adaptive optics and integral field spectrographs (e.g. GPI, SPHERE, HiCIAO), and we anticipate this instrument will make a lasting contribution to high contrast imaging in the Northern Hemisphere for years.