Before its launch, it was feared that Apple's iPod Touch would not support Voice over IP. The reasons for that were firstly because iPod is not a phone, and secondly, Apple's policies against the use of VoIP over cellular and other networks. So, can you turn your iPod Touch into a phone?
Yes, if you have the new iPod Touch, you can empower it with VoIP and make free or cheap local and international calls. The previous model of Apple's iPod had only 4 wires for the headphone jack. This new iPod Touch model had got 5 wires, of which one can be used for microphones integrated into headphones for voice input.
Apple opposes the use of cellular networks for VoIP calls, but leaves the door open for Wi-Fi. So, you can use your iPod Touch in any Wi-Fi hotspot or around a Wi-Fi router to make unlimited local and international calls, for free or very cheap.
An important thing you will need is a softphone application or web-based service that is compatible (designed for) Apple's iPod Touch. Truphone and Fring are examples. Here is a whole list of such applications that work very well on the iPhone, but I've heard not word yet as to whether they do on iPod. Technically speaking, they should work, given they will be on the same operating environment. Try them.