Recently I've gotten into the amazing world of iPod touch hacking, and some of the things you can do are pretty amazing... such as playing quake 1... multiplayer included!
Some other awesome things you can do include:
playstation 1 emulator (FFVII anyone?)
emulators for practically any older system.
The version 2.0.2 firmware, which I had to download to use quake, is still being hacked to its full potential (most emualtors don't work on it yet), so if you have a iPhone i'd stick to 1.1.4.