How does the retina display function work on the new iPod Touch that is coming out?
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M$2 Answers
This is possible because the pixel density of the Retina display is so high and makes every text and graphic look smooth, sharper and continuous at all sizes.
If you want to see how this feature works, go to this Apple page (http://www.apple.com/ipodtouch/features/retina-display.html) and pass your mouse over the iTouch image on the screen. The circle on the image that moves with your mouse is the retina display.
http://www.digitalrendezvous.net/wordpress/wp-content/uploads/2010/06/devices-iphone-retina-display-zoom.png
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M$With at least close to 2 billion games available at the App Store, the iPod Touch has truly become a more attractive platform for gamers beating competitors such as Nintendo and Sony in terms of the mobile video game pie. Furthermore, this portable device is much thinner than the iPhone 4, runs iOS 4.1 and bundled with Apple's Game Center, users have a complete package.
Accordingly, "the iPod touch also now sports a front-facing VGA camera, making it the second of Apple's devices with support for its FaceTime video-chattingtechnology for chatting with both other iPod touch owners and iPhone 4 owners."
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M$

Thanks @edwardclint :-)
Nice answer!!