Like the iPhone the iPod Touch has a multi-touch user interface with everything done through dynamic controls on the screen that dominates the device, all dependent on the physical orientation of the device. This is interesting and it does work well when using the device is your main focus, like when watching videos.
Where it falls down is in the music player. One problem is that the controls aren’t consistently in the same place and have no tactile feedback. Worse, unlocking the device when the controls have been idle for a while requires a relatively complex operation (either a treble click of the home button or swiping a software unlock control across the breadth of the screen). This means that if using the Touch isn’t your sole focus, for example when listening to it in the gym or walking around town, it is intrusive to use, demanding too much attention. Even for basic operations like pausing or changing the volume you need to look at it to find out what controls are available and where they are.
It’s an interesting direction for user interfaces but I don’t think it works for a device that should be unintrusive.