The Touches are all microphone-capable. In the most recent generation, the larger capacity Touches come with Apple earphones that have the built-in microphone, but the entry-level 8GB Touch comes with regular earphones. For my previous generation Touch, I bought and use a microphone by Monster that has a jack that lets you use your choice of earphones.
Second generation iPod Touch is mic compatible. First gen Touch isn't. It doesn't have audio-in wired to the headphone port, but MacAlly iVoice III mic can plug into the dock connector port; firmware v.3.x disables it.
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