Guys, it's called Emoji. It's a japanese thing for the iPod Touch/iPhone that contains a stuffload of emotes, and is actually awesome.
Screenshot:

Straight from my jailbroken 2G, but the pic itself is a bit old.
You can also get it some really odd and really complex way without jailbreaking.
Also, apple decided to be stupid and make it a font instead of making it ":D" or something.
@pixl: I'm guessing you jailbroke your iPod at last?