An iPod Touch is a decent portable media player, internet, and gaming device that has access to (most of) the same apps as an iPhone, for a fraction of a price and no mobile service plan to worry about. I don't see why it's surprising that people might still be interested in it. Think teenagers, for example, who can't afford or their parents simply don't want to get them a smartphone.
Maybe a few years ago, but you'd think now that the market is so saturated with older phones like the 4/4S which you can buy second hand for a similar price, plus you get the phone functionality.