It doesn't have: Phone, GPS, or a camera. The touch is available with more storage, and can run nearly all the apps that don't require the extra hardware that the iphone has. I wouldn't call it gameboy, but there are plenty of fun/addictive games out there, and many of them are free.
An Ipod touch is actually a really ingenious design, meaning that you can have all the functions of a normal iphone without the monthly data plan.
I use my Itouch daily in class and while I'm at work. It saves me the hassle of using work computers to surf sites such as the great DFWstangs, with little notice by my boss/profs. Although some of the apps are designed for the iphone directly, so the microphone and the direct GPS function (if you are without a wireless internet signal) only work with the iphone.
Other than that, its sleek, and fits in your pocket easily.. I enjoy mine and I usually carry the itouch with my cellphone as a pair but some would say that is a downside, I would say its cheaper than paying the full amount for the data plan and the phone.
I had a touch before my iphone and it was pretty cool as long as wifi was available and that isnt often for me. They have wifi up here at work but its locked down and so I was forced to only use it at home which was pointless. Games are there but they dont compare to a PSP or DS by any means.