I'd probably get more use out of the Touch, plus its newer and more enviable than the xbox right now.
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I would suggest an xbox 360. There are so many great games that have been released this year for the console that its too much to pass up. Some of these include Fallout 3, Gears of War 2, Rock Band 2, Guitar Hero World Tour.

An iPod Touch is a great gift if you are simply looking for an awesome and fancy music player that also has the ability to play sub-par games.

It really depends of if they are looking for music or looking to game.
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hmmm mobile gaming vs console gaming. touch question to answer without knowing more about the recipient. for me. id choose the console, xbox360.

but thats becuase.. i already have a Netflix account so i can integrate the two for streaming of movies... i already have a large hd tv which the 360 will look great on. i dont mind paying for an xboxGold membership for online play. and finally becuase i really enjoy gaming and i have a laptop which is with my 90% of the time, hence covering my need for mobile web.

iPod touch is nice if..
.. i was a music lover and wanted/needed mobile music options.
.. i wasnt able to get an iphone for one reason or another
.. was into casual gaming and loved gadgets.
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If you already have an iPod, then the 360 would be a better choice. The games and apps on the Touch are nice, but can't compare with the library the 360 has to offer, like Fallout 3, Fable 2, GOW 2, as well as being a great media center. However, if you don't have an iPod, and are on the go a lot, then maybe the Touch would be a better option.
Source(s):
Opinion

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Personally, I think the touch is more useful. Besides portable music, games and video I hear the touch makes a great internet tablet. Either Peter Rojas or Ryan Block said on their gdgt weakly podcast that they use the touch all the time for surfing from the couch or in bed or whatever. This is the main reason I want one. Being able to disconnect from my computer to do light surfing on top of the other uses the Touch has puts it at the top of my current gadget want list. This assumes you are around a wifi connection most of the time of course.

All that said, I would go iPhone for the same reason if it wasn't for the ridiculous monthly fees involved.
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The iPod Touch if you're out and about a good bit or enjoy listening to podcasts & music

The 360 if you're a gamer or have a Netflix account
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The answer depends heavily on the lifestyle of the person you are asking. If you are a heavy gamer who enjoys playing exclusive games to the 360, then that would be your choice. If you spend little time at home, or if you already own a ps3 or psp, then you would want to go with the ipod touch. Personally, I would like the ipod touch, because I already own a psp, and I spend more time out of my house than in it.
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For me: iPOD Touch. No doubt. ..The XBox 360 is good, but there are a three things that stop me getting it: 1) it's *loud*. Seriously, like a goddamn hair-drier. Neither me nor my girl could put up with that. 2) I hear too much on the gaming forums about those things dieing. I just don't trust the hardware. (Absolutely not kidding: seems to be more people on the podcasts I listen to had one die than not.) 3) I'm not home a huge amount, and for the times I am, the PC is fine for my gaming. (Many XBox games will be ported to the PC at some point, so I'm not missing out so much, and for casual games I have a ton of emulators and other small games already.)

The iPod touch on the other hand.. There is an absolute *ton* of Apps appearing for that thing these day. Lots of good puzzle games: Bejeweled, Tetris, Puzloop; racing games: Powerboat, MotoChaser, Low Grav Racer; console ports: Monkeyball, Spore; and a ton of other cool stuff: Duckshoot, DizzyBee, MotionX Poker, Bike or Die, Fieldrunners, Pinball Inferno, Enigmo, Snail Mail. ..there's even a lot of free stuff that's of great quality: 21 Pro, Tangram, Tap Tap revenge, Pool, etc. And the prices are seriously *good*.

If you're gonna be away from home a bit, or would like full roam of the house when you're not (can sit down with the family and still game), the Touch is perfect. If you're around WiFi that opens you up to still checking Twitter, IM, eMail, and the web too.

Full disclosure: I have an iPhone. It freaking rocks. :) I think before the 2009 is out we'll be a family of iPhoners.
Source(s):
http://www.slidetoplay.com/
http://toucharcade.com/

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Xbox 360.
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without a doubt the XBOX 360! the iphone and ipod touch are really cool, but not something that can keep you entertained and having fun all night, or with friends :)
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Most likely the iPod Touch; it's portable, there's tons of applications, and you can frankly do more with it than just play games.
Source(s):
My brain.

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