These days just about every Tom, Dick, and Harry owns an iPod of some sort. In my family alone we cover the entire suite. Mum has the shuffle, Bro has the nano, Dad has the classic, and I now have the touch. So it's pretty safe to assume that you are all familiar with at least one model if not all and thus I won't waste any time elaborating on its features.
Now why would I buy an iPod of any sort when my phone is already a very good mp3 player? I wouldn't. It just so happened that by buying my Mac through my school's online Apple store I qualified for a free one. Who knew? The only catch is that my touch is not the latest generation with face-time, a front-facing camera, and all that good new stuff. Apple was just getting rid of their old stock with this deal.
Still, even a 2nd generation iPod touch is a good deal (that's a $200 value - absolutely free. LOL). Put simply, the old touch is the iPhone without the phone. Since I already have a phone, that works out nicely for me. I can browse the internet, download apps, send emails... do everything besides real work while listening to some old school jams. As a side-note, the engraving I got on the back of my iPod (also absolutely free) reads: "Old School Music Rocks! Put some on me ^_^"
So while I wouldn't buy one, I am definitely going to enjoy having one. And if you don't already have a sufficient mobile mp3 player, you might want to consider an iPod just not necessarily an iPod touch unless you have a crap phone - In which case it would make more sense to take your $200 and buy a better phone.
For a full list of iPod models, features, pictures, and video demonstrations, visit: http://www.apple.com/ipod/