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Skype is an awesome way for people to stay in touch and connect for free. With the Skype application for iOS you can turn your iPod touch into a phone and make calls for free. All you you need is an iPod touch (2nd generation and up), a compatible headset with a built in microphone, and wifi. iOS 4 would also be nice.

Step 1: Get the App

Go into the app store and search for Skype. Download it to your iPod.

Step 2: Make an Account

You will need your name, a Skype name, password, and e-mail. Other people may have already taken your desired Skype name so may have to try again. Then, add more info to your profile such as your location to make it easier for your friends to find you in the directory.

Step 3: Using Skype

People add each other to their contacts through contact requests. People can accept or decline requests to be contacts with you. You search people in Skype's directory and you can search based on name, skype name, e-mail, and location.

You can make free calls between people on Skype only. Calling landlines, mobiles, or using other services requires you to purchase Skype credit. If you have iOS4, you will be able to recieve calls while in other programs or if the iPod is locked. You will also be able to multitask if you have a 32GB or 64GB model.

You need a compatible headset with a built in microphone for this to work sine the iPod touch does not have a microphone, and only third generation iPods come with one with the microphone built in. I don't know if a bluetooth headset would work. Please try it out and let me know how it goes.
this would work great if you were always in a place with wifi :)
Actually you can turn your iPod touch into a WiFi phone even on the go by using a 3G mobile hotspot (MiFi), and I'm using the fastest ZTE 60 3G hotspot right now. Google it

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