What should I do with it? Any suggestions for iPod users out there?
JailBreaking is when you basically "unlock" your iPhone/iPod Touch so that you can download 3rd party applications like Cydia. Basically, you can do all kinds of sick features on you iPhone/iPod Touch like my home screen below,
This is my homescreen jailbroken. (With Cydia add-on enabled.)
This is my homescreen not jailbroken. (No extra add-on from Cydia.)

It also gives you the ability to download TONS of free applications and games.
Yes, JailBreaking does get rid of the waranty. BUT, my friend did it and we went to the Apple store to get it fixed, but before we went there, we un installed the Jailbreaking software installed in it and they couldn't tell the difference! We got it fixed without a problem.