When writing about the multimedia capabilities of the iPhone this summer, we called it "the iPod that's really a phone". You could say that the iPod touch is the iPhone that's really an iPod. See also: Second-gen iPod touch review and 32GB iPod touch review.
Video playback works much the same way as on an iPhone, but Apple has included a couple of Settings options not currently found on the iPhone. Go to the iPod touch's Settings application, tap video and you'll see Start Playing (you choose between starting from the beginning or resuming from where the video was last played on the iPod or within iTunes) and Closed Captioning (On/Off) options and Widescreen and TV Signal TV Out options. (Widescreen is an On/Off toggle and TV Signal lets you select NTSC or PAL.)
Applications
The iPod touch also carries many of the same applications as the iPhone. You'll find Safari, YouTube, Calendar, Clock, and Calculator. Each of these works just as it does on the iPhone - Safari operates in both portrait and landscape mode and all the flick and pinch motions work just as they do on the iPhone - with the exception that any connection to a phone or email application has been severed. For example, if you go into a contact's Info screen, you can look at that contact's phone number or email address but, unlike with the iPhone, tapping these bits of text won't initiate a phone call or create an email.
(Okay, there's one apparent addition to the iPod touch's version of Safari. In Safari Settings I found a Develop option. Tap it and you find the option to turn on or off a Debug Console, which supposedly helps you resolve web page errors. This doesn't look like it's designed for users so it's quite possible it will disappear in the shipping version of the iPod touch.)
With the iPhone touch, Apple has created a separate Contacts application rather than placing it inside the (in this case, non-existent) Phone area. Tap Contacts, and it, too, works just as it does on the iPhone. Here you can add and edit contact information as well as assign photos you've stored on the iPod to a contact.
The iPod touch lacks all of the iPhone's communication features so you won't find the Phone, Text, Stocks, Maps and Weather applications. Because Safari is included, communication isn't completely out. For example, through Safari, you'll be able to operate webmail and, I assume, use web-based instant messaging clients that have been developed for the iPhone.
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