Backing Up, Updating, and Restoring your iPod Touch

1- "iTunes creates backups of settings, downloaded applications and data, and other information if you want to buy an iPod touch. You can use a backup to restore these items to your iPod touch after a software restore or to transfer the information to another iPod touch."
Please refer to iPod Touch User Guide Appendix A which gives you additional details in the Troubleshooting (Appendix A) pp 156-158.

2- Apple Support Store link for Backing up, updating, and restoring your iPhone and iPod touch software


4- Deleting a Backup
  1. Open iTunes Preferences:
    Windows: Choose Edit > Preferences.
    Mac: Choose iTunes > Preferences.
  2. Click Devices (iPhone or iPod touch does not need to be connected).
  3. iTunes 8.1 or later will show the phone number, IMEI, and serial number of the backed up iPhone when you position your mouse pointer over a backup (serial number only for iPod touch). Use this to locate the backup for the iPhone you want to delete. Select the backup you want to remove and click Delete Backup.
    Devices screen with iPhone number, IMEI, and Serial > Number
    Devices screen with iPhone number, IMEI, and Serial > Number
  4. Confirm you wish to remove the selected backup by clicking Delete Backup.
  5. Click OK to close the iTunes Preferences Window.

5- File Management: How do I find where my iPod Touch backup folder is stored on my computer? (This back up is not your iTunes Library.)
The backup folder is located at:

For Mac

"YOUR_MAC_USER_NAME"/Library/Application Support/MobileSync/Backup

For PC

C:\Documents and Settings\YOUR_USER_NAME\Application Data\Apple Computer\SyncServices\Local

The file "data.syncdb" appears to be the one.