Thank's for the replies so far.
Now I can understand using an iPod classic. It has no apps and stuff. Nothing but a huge hard drive for tons of media. That's definitely useful. No need to mess around with apps or whatever. Just drop your media and go. Especially if you have the 160GB version. You would store all your videos, shows, music, audiobooks and podcasts on it and still have room to spare (Unless you have massive libraries).
But my iPod touch just sits on its box right now. Before getting my iPhone 4S, I used it along side a dumb phone for that classic combo. I use my iPad for taking notes in my university and for games as well.
Now I can also see the use for having an iPod nano for us Smartphone + Tablet owners. You could use it as an extremely geeky watch. It would work as a powerful female repellant (unless they happen to be geeky or otherwise cool with these things. Which is a good idea now that I think about it. Attract only the good ones.
). Plug in one of those bluetooth adapters and go for a run. With all your music on the nano.
I use my iPod shuffle at the gym since its tiny and not too expensive. Its expendable. Unlike your expensive iPhone. I'd rather use my shuffle at the gym for this reason. Accidents can happen and I'd rather have my shuffle crushed under a barbell than my iPhone.
But yeah, an iPod touch and an iPhone serve the same purpose. Just one is a phone and the other is not. Keep the replies coming.