The iPod Touch has largely been considered the lesser iDevice from the three, standing far behind the iPhone and iPad in terms of usability and features. The differences between the iPhone and iPod touch are actually somewhat profound in that in its current incarnation the iPod Touch lacks phone calls, constant Internet connectivity, text messaging, and even hardware elements. The iOS 5 is going to bring in iMessages, which will be an Internet based text-messaging feature that will allow texting between iDevices. This will cover the iPod Touch for communication for much of the mobile market, but it still depends on a solid Wi-Fi connection to allow for this. This may be why many people are suspecting that the iPod Touch 3G, or possibly even the iPod Touch 4G, is right around the corner.
The real issue with the iPod Touch 3G has always been that it did not seem like a practical framework to give an iPod a 3G Internet connection. The standard was that the iPhone required a phone and data contract, but the iPod Touch has to remain an independent device since it is not of that platform. This may have been true until the release of the iPad where you saw both Wi-Fi only and 3G capable versions, meaning that a mobile device like this could be practically contracted for a data service in this marketplace. That only shows part of the consumer shift where many devices are taking this approach, which is really what the whole netbook market share has been about.
If the iPod Touch ended up being capable of the 3G network it would end up bridging the gap between it and the iPhone to a very small line where traditional cell phone service lies. Phone calls could be made with things like Skype and FaceTime, iMessaging and other instant messaging services would take care of most else, and social networking, email, and a true GPS receiver would all be standardized. This would likely also shift the use of smart devices away from conventional phone service into a purely Internet functional model, which is the inevitable place for this.
The benefits for Apple, as well as Verizon and AT&T, are going to be obvious, at least on the short term. There could be a data plan option that is similar to that of the iPad, possibly even taking the new-tiered data system that Verizon is introducing. This would then allow for a whole new contract model, though many of the fears are likely around how a lesser device like this could slow iPhone sales and phone use if given these types of capabilities. The reality is that this would take several years at heavy market saturation to achieve, and the likelihood is that people would maintain traditional phone service until the model shifts dramatically. The iPod Touch 3G would not be capable of making that shift on its own, though it would cement a whole new line of iPod users.
When this release will actually be is completely unknown, and at this point it is still just iPod Touch rumor and speculation. The iOS 5 features that were announced seemed to suggest its possibility, mainly through iMessages and the upgrades to Safari and Mail. There have not been any concrete hardware announcements around the iPhone 5 or the newest iPod Touch models, so it is still not out of the question. There could even be a suggestion that the Verizon data tier structure could be in anticipation for a new device to hit their data plans, but this is again just part of the iPod Touch rumor factory. Until we have anything concrete we are just dreaming of a permanently connected iPod Touch world.