Totally different.
iPod video (now called the classic) is a music player, that happens to do video fairly well too.
iPod touch is, or will be, a platform to run all sorts of applications on. Everything from a calculator to a password manager to spreadsheets, word documents, etc.
It also happens to play music and video fairly well.
In short: very different.
touch has touch-screen (duh), but not that much memory (up to 32GB, may easily suffice you). Will soon be able to easily download and use all sorts of apps on it, with email, contact manager, etc. A bit like the old PDA computers, but better.
classic is a music player only. But it stores a lot more -- up to 160GB.
If you have a huge music library and want all your stuff with you, get a classic. If you just want a music player or decent video player, get a classic.
If you want the platform and ability to do all these other things, as well as having a larger screen (2.5" vs 3" I think), get a touch.