"New Tracks" Will download new tracks WITH Beats to your disk. Dunno where they're stored, but they're pretty small.
"Downloaded Tracks" Plays the tracks you downloaded from "New Tracks".
"iTunes Library" gives you a list of the songs that are in your library AND have beats with them.
"Create New Beats" gives you artist -> song listings for all songs on your iPod. You are then promoted to "tap along" to make beats. Unfortunately, this is broken on the iPod Touch and will completely hard reboot your iPod. I recommend NOT doing this and stiucking with the free tracks, which aren't that bad TBH