There's a program that many people here use called Handbrake (
http://handbrake.fr). It's available for both Windows and OS X, and offers many upon many different functions in regards to both ripping DVDs and encoding videos - I've ripped about 20 or so seasons of various tv shows using it.
This is how I rip DVDs using it:
It does have an iPod touch preset, but I find the filesize ends up being way too big for watching something that's going to play on a screen that small (in other words, you can have it at a smaller size and you won't necessarily see any difference in quality).
So I usually tell it that, for a standard 20-minute tv show, I want a file around 100MB in size and also set 2-pass encoding (what this does is it scans the file so that it knows where it needs to change the bitrate so that it stays at a decent quality, and then it scans it a second time, ripping it in accordance with the bitrates it set out the first time). This means that high-action scenes will have a higher bitrate as opposed to the same bitrate being used throughout the entire video, so you shouldn't notice sudden changes in quality between high and low-action scenes.
For movies, I usually rip a file around 700MB in size for approximately a one-and-a-half hour long film. Once it starts getting longer, I bump the size up a bit - for a 2 hour movie I have an 800MB file, for a 2 and a half hour long movie I use a 900MB file. I did initially rip some movies at 500MB, but that came out at really, really terrible quality. There's next to no artefacting when you rip it at 700MB or more because on a screen that size you won't notice.