If you hold your ipod up to the light just right, peer under the glass toward the top near the camera lens and you should see it. May be different depending on which gen ipod you have. You will notice some covers or cases will have a spot opened up for the sensor and wondered what that was for.

>squints<

Nope, still don't see it - maybe I ought to try in full sunlight (so, I'll get back to you sometime in late August...).

They're on a lot of stuff, usually the same dot has the proximity sensor for phones etc.