Described by Apple itself as the ‘funnest’ iPod ever, the iPod touch may now be the ‘useful-est’ too thanks to FREE software - Truphone for iPod touch - that effectively turns one into a mobile phone.

Not only is the software free, but calls made using Truphone’s application for the iPod Touch are also FREE - just in time to save precious cash when making those Christmas calls to friends and family.

Once installed, and with the addition of microphone adaptor (Truphone microphone adaptor available soon)*, an iPod touch owner can make free calls - no matter where any are in the world - to other iPod touch owners, to customers of Truphone’s Internet telephony service, and to users of the Google Talk™ instant messaging service.

Truphone for iPod touch will become a one-stop-shop social hub with the following features coming soon:

• Making and receiving calls to and from landlines (PSTN) at low cost (simply set yourself up with a Truphone account)
• Instant messaging to Skype and MSN (free)
• Calling to Skype users (free)
• Calling to MSN users (free)
• Check and set facilities for Twitter (free)
• Check and set facilities for Facebook (free)

Truphone for iPod touch is easily downloaded from Apple’s App Store in exactly the same way as any other iPod touch application.

The software uses the iPod touch’s Wi-Fi connection to carry calls over the internet to its destination. There is no monthly line rental, no subscription or other hidden charges.

Mike from techcrunch seems to like it. Check out Alexander’s comment as well.