An SDK is a Software Development Kit.
There is one coming for the iPod touch/iPhone - we will hear some more about it on the morning of March 6th (Cupertino Time that is, Friday morning here). It will allow software developers the chance to make native applications ie apps that aren't just nicely formatted web pages.
We'll have to wait a few more days for more details but once developers get their hands on it it will probably be a while before their apps are released and available - most likely for purchase on iTunes.