It'll play all your music, run all the apps from Apple's App Store you might want to put on it (with a very few exceptions), and is cheaper and lighter than the equivalent iPhone.
As has been said, the iPod touch is a bit like an iPhone, but without the phone bit. It works well for playing music, but really the main focus of it for several years has been for people who want to use apps from the App Store on a handheld device, but who don't want to pay the full price of an iPhone to do so.
If your main interest is in listening to music, a cheap Android phone with a large SD card together with a good music app from the Play Store would be a much more cost effective option.