I got one of these a few months ago and so have had plenty of time to play arouund with it and see what it does well (or badly)
If you have an iphone, you won't need one of these, however, as a standalone device, there IS still a place for this, amongst it's many functions are:
As an MP3 player at the gym, expecially if I want to train and not get called!)
As a storage device (great for movies whilst donating blood!)
As a gaming device, well, It doesn't cost much to buy somme very good and addictive games for this (I'm playing galaxy on fire as I write this!)
Facebook updating - Again, a very handy utility
Ebaying! - Also very good, my wireless internet runs at about 3.5Mbps on my ipod touch
General internetting - very good, but WHY does nothing support flash?!?!?!
Touch =It IS the best touch interface ever made, got to hand it to Apple there!
- is propritary connector and also non-replaceable battery!
Also, up and coming is cut and paste and, mor importantly, BLUETOOTH! so wireless headsets and GPS modules await you!