Nobody in my family has an iPhone (prefer Android), but I think the Touch is similar except for the actual phone function. You can load apps, play games, hook up to WiFi, etc. Mine just sits in my car, so I don't know that much about what it does other than play music. I'm hoping the Touch should be even more durable than the old one with solid state memory instead of a hard drive.
Got it as a present after my venerable iPod video bit the dust, I could still select songs on it but they would not play. If your iTunes account is current, you should just be able to register your new device to that account...worked fine when my daughter got a new nano. I screwed myself because I used a work email to set up my iTunes and then didn't touch it for years while changing jobs 3 times (2009, nuf ced), so I ended up starting from scratch with the new device. May have been possible to recover my old stuff somehow, but I just started fresh...probably only had $20 or so of purchases on the old account, I usually rip CDs.