i just jailbroken my iPod and then when i opened iTunes thats what they said.
i already tried to uninstall, download, and install iTunes, but it still does not work.
just press the sleep and home button while connected to the computer.. then when the screen turns black just release the sleep button but keep pressing the home button.. it will then reset and when u connect to iTunes u can reset it there..
It sounds to me like you have started jailbreaking and haven't finished cause the same thing happened to me and when i went to setting - general - about on my ipod it told me i only had 300mb of memory instead of 14.8gb and what i did was restored my computer to an earlier time before i did all the jailbreaking stuff and then re-installed itunes and pressed the sleep/wake button and the home button to reset it which made itunes recognise my touch and then i had to restore it using itunes.