The appeal is a much bigger screen than traditional phones, very nice GUI, full web browser and thousands upon thousands of apps and games.
I own the Touch and I'm glad I did. I don't use it as a music player at all. It's more like a utility for me. Some of the apps are really cool. For instance Yelp and AroundMe can tell me if there are any good places to eat, gas stations, parking lots that are close to my proximity. You can watch videos directly from YouTube and download music or podcasts straight from the iTunes app. There so much more but I'll let other people give reasons why.