I have used my fourth-generation iPod touch extremely heavily over the last month, and it's easy to conclude that it represents a significant upgrade from my first-gen model.
The new display is stunning, and even though there are some issues with the camera it's still great to have it in my pocket at all times. The external speaker is good quality though not terribly loud, but it's great to have one and makes playing games without headphones a lot more fun. Being able to use it with the Apple Wireless Keyboard means that the Touch can be much more than a simple entertainment device if you want it to be.
Whether or not the new features like the camera with video capture and the new Retina display make it a worthy upgrade from a second- or third-generation device is a more difficult question to answer at this point, and depends a great deal on your budget.
If you don't already have an iPod Touch and can't stand the thought of signing a contract with AT&T in order to get the iPhone, the new iPod Touch is a great all-around entertainment and productivity device. I find myself reaching for it constantly at the office, at home, and on the go, and the latest iPod Touch is likely to be on plenty of Christmas wish lists this year.
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