Unlike some other ebook applications for iPod Touch I tried, it is easy to use and has a great library of free books. These books are classics, out of copyright and available for free in the Stanza library (you download them onto your iPod touch through wireless connection).
Most of them are also available on Gutenberg, but they had even two books of Agatha Christie.
The library carries mostly books in English. I found books in French too and they are starting to have books in German.
Some of the features I really like (and was missing when reading ebooks on my Nintendo DS) are:
1) one can go from and to any chapter (for example, to view one's favorite parts, hehe)
2) one can easily scroll within a chapter
3) one can easily change the font type and size
4) one can easily change the background and font color
I have now to figure how to transfer self made ebooks into the iPod Touch. It can be done only wirelessly (unlike notes on the iPod Nano).
When reading...

When browsing chapters, etc...

PS: it also works on iPhone...