When you bought the iPod, you paid for 4GB. That's 4,000,000,000 bytes. A computer uses binary and thus everything is in multiples of two. Back in the early days the term "kilobyte" and "megabyte" etc were used incorrectly as the terms kilo and mega etc refer to thousands and millions whereas a "kilobyte" was really 1024 bytes.
As storage space increased this difference grew so they started marking the boxes *1GB = one billion bytes - it's correct but computers still use binary and as such you "lose" about 7% of the advertised storage space. This is the reason for the emergence of the GiB, KiB, MiB suffixes for storage.
To put it mathematically:
You paid for 4,000,000,000 bytes
divided by 1024 = 3,906,250 KiB - what the computer considers a "kilobyte"
divided by 1024 = 3,184.697 MiB - what the computer considers a "megabyte"
divided by 1024 = 3.725 GiB - what the computer considers a "gigabyte"
You then lose a fraction of that 3.725 GiB to formatting and pre-installed stuff.
So you see, you got the 4,000,000,000 bytes you paid for, there's just a problem with the way we've termed storage capacities. Technically, 1024 bytes should never have been termed a "kilobyte" and so on.
Imagine if you had bought a 1TB drive only to find you've suddenly "lost" 70GB. 1TB = 930GiB but you still have the 1,000,000,000,000 bytes you paid for.