Jailbreak?

Basically it means its been opened up for third party applications to be installed. Once your iPod is jailbroken, and you have the Installer.app on your springboard, you can install the iPhone apps, 3rd party apps, etc.

The benefit? Picture this... You bought a beautiful house with a nice 3 car garage. The garage has a Ford Pinto in the first stall and the rest of the garage is empty. No tools, no boxes, no canoes hanging from hooks, no bicycles in the corner.... nothing. The second and third stalls both have painted yellow lines on it that say you can't tread there. That's your iPod Touch.

Now, picture that same garage with a huge set of Craftsman toolboxes, each drawer with a ton of stuff in it. You've got a wood planer off to the third stall next to a table saw. Hanging behind it is a Sawzall. In the second stall you've now got a Cadillac SUV. Hanging from the ceiling are 3 different are compression nozzles for the massive set of tools that are hanging from the far wall. That's your Jailbroken iPod touch. The jailbreaking just opens up the Touch to more capabilities.

You are always able to just clear out that garage with a Restore that will once again put your Touch to its factory abilities, but where's the fun in that?