The main difference (and only difference as far as I know) is one is a phone and one is not.
My parents have the Ipod Touch and they like it for playing their music and using it as an 'on the go' photo album. They got it free when they bought their computer. They already have a cell phone (via Verizon on my Family plan).
If you already have a cell phone/provider that you like, I'd just get the Touch.
But if you don't have a cell phone or want to upgrade and you are fine with AT&T as a cell phone provider, then I'd invest in the IPhone.
That way, you'd have a cell phone with all the bells and whistles that the Touch alone has.
~Kimmy, Zam, Logan, Raptor, Nimrod, Mei, Jasper, Esme, & Lucy Inara
RIP Kia, Chipper, Morla, & June
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