You mean, how do you type code in, and where do you save the source files to?
Well, you could install a text editor like vim on there (available in Cydia), and you can save the source file(s) anywhere on the filesystem you like, navigating around and initiating project builds using your UNIX shell of choice within MobileTerminal. But honestly, I don't see how entering code directly into an iPod or iPhone can be a practical or comfortable experience. In fact, it sounds downright painful to me.
I'm sure you would be much better off sticking with your favorite text editor or IDE of choice on your desktop and then cross-compiling to ARM; the Xcode ARM compiler included with the iPhone SDK is more than up to the task. No reason to install a compiler directly to your phone, other than for building OTHER people's already-written projects on-the-go (hopefully they're small ones, because anything of moderate size I'm sure will take a while for the build process to complete directly on your iDevice), or for curiosity's sake.
-- Nathan