I own both, and then some.
The Touch is a media device, and I use it most often (but not only) as a meditation timer, or when I want to see a TV episode in a situation where the iPad is too big or clumsy to pull out. It has other uses - music tuner, metronome, for example, or checking mail, but the first ones mentioned are the main ones. I can use it till the battery wears out, without being worried about my phone battery being depleted.
I have an iPhone 4 for work. This is because 1) I want to keep my personal and work phones separate, 2) my workplace doesn't allow use of the carrier I have for my personal phone, and 3) I happened to be using Android already for my personal phone and wanted to continue. The iPhone serves my purposes well as a work phone, and is used almost exclusively for work mail and calendar, though I do have a little music on it just in case I'm in a situation where I'm bored and want to hear some tunes.
Most of my personal phone needs are met by my Note II, which I love for various reasons.
The "and then some" part:
I also have an iPod Nano from a few years back (the small square one that can show video as well). Use that for audiobooks, about an hour or so a day. Works great, very tiny, I love it.
Basically, each one has such an individual role that it complements the others pretty well.
tl;dr: I have both because I like to use the Touch without it draining my phone battery.