In general, iPod touch is a phone-less iPhone. Both share similar hardware specs, and with each hardware iteration there are some differences:
* iPod touch does not have cellular networking. Which also means you can buy it without a contract or monthly fee.
* iPod touch is cheaper.
* iPod touch is thinner and lighter.
* iPod touch has 256MB RAM, iPhone 4 has 512MB RAM.
* iPod touch’s rear camera is less than one megapixel resolution at 960×720. Compare this with iPhone 4’s five megapixel at 2592 x 1936. 1M resolution is hardly usable for 4×6 printing. Should be fine for casual web photos.
* iPod touch has no GPS.
* There is no remote or microphone for iPod touch’s bundled headphones.
* iPod touch has a high resolution 960×640 display as iPhone 4. But it does not look as good as the iPhone 4.
* The 8GB iPod touch ($229) is a new generation device as it has Retina Display and dual camera. In prior years, the lowest end model was based on previous year’s model. In comparison, the 8GB iPhone model that you buy now is based on last year’s iPhone 3GS design.
* There is 64GB option for iPod touch.