Most notably, the device now includes the "Face Time" video conferencing service, allowing users to telephone over the internet.
The iPod touch, the flagship of Apple's MP3 player line, always looked similar to an iPhone. All that was missing was the cellular service component. The fourth generation of the music player, now hitting the market, remains something less than a full-featured smartphone, yet now it too can use the internet to make phone calls.
And the device, measuring in at just 7.2 millimetres in thickness, supports "Face Time" videoconferencing - the same wow factor introduced by Apple for the iPhone 4.
At the same time as the fourth generation of the iPod touch hits the stores, Apple is also releasing completely reworked versions of the smaller iPod nano and iPod Shuffle models.
"Anyone who claimed that the iPod has reached the end of its life cycle was completely wrong", said market watcher Michael Gartenberg after seeing the iPod presentation from Apple CEO Steve Jobs.
The features list for the fourth generation of the iPod touch resembles that of its bigger brother, the iPhone. It starts on the inside, with the A4 chip developed by Apple. The unit now features the "retina display" (960 x 640 pixels) that has earned the iPhone 4 a healthy dose of praise as well.
Only the camera in the new iPod touch lags a bit behind, unable to match the fine optics of the iPhone. That said, the iPod touch matches the iPhone 4 in the ability to take HDR (High Dynamic Range) photos. To do so, the device shoots three photos in quick succession under different lighting settings, and uses them to calculate the optimally lit HDR image.
Apple is continuing to position the device more pointedly than ever as a mobile gaming console, going on the offensive against the Playstation Portable (PSP) from Sony and the DS console from Nintendo. Hardware functions like the gyro sensor that measures rotation or changes to rotational motions are intended to facilitate the creation of novel games.
Jobs also announced a "game center" in operating system iOS 4.1, allowing owners of an iPhone or iPod touch to play networked with one another. The "Game centre" offers direct access to multi-player games like Project Sword from Epic Games.
The versatility of the iPod touch is reflected in its price. The 8 gigabyte (GB) variant costs about $229, with the 32 GB version costing around $299 and the 64 gigabyte model coming in at around $399.
The smaller iPods - nano and shuffle - are not benefiting from iPhone operating system developments, although the new iPod nano does now come with a touch sensitive screen. The size of the iPod nano display is 1.5 inches, just like its predecessor. Yet at just 21 grams, the player is almost half the weight of before.
The weight comes at the expense of the familiar clickwheel, since the player is controlled directly via the screen. Some Nano users may also miss the video function, which didn't make the cut for the relaunch. The iPod nano is offered in seven colours and costs about $159 (8 gigabytes) or around $189 (16 GB).
The wheel has actually made a comeback on Apple's smallest iPod model, the iPod shuffle. While the previous model was controlled solely by voice, Apple has restored hardware buttons to the new shuffle.
"The customers kept telling us they wanted it," an Apple spokesman explained. The 12.5 gramme iPod shuffle is available in five colours for $49.
The elephant in the room is the fate of the traditional iPods with an integrated hard drive. Apple CEO Steve Jobs didn't offer a single word about the iPod classic at the launch event in San Francisco. Long the best-seller of the Apple lineup, the classic and its 160 gigabytes of storage space is still a good choice for large music collections.
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