Originally posted by drewhiggins:[..]
The great thing is that you can still use iTunes and buy music and apps from the App Store, but as an addition you can theme your iPod and funk it up with Winterboard, use Cydia to download applications and games and generally make it better. It is known as jailbreaking. But before you even try to Jailbreak it, you have to know how to fix it in case you can't boot it properly. I had to restore about ten times before I got it right!
Check out ModMyI.com, iPodTouchFans.com and MacThemes2.net for what you can do. At those stores, they are trained to sell the product as minimal as possible, but you can certainly download games and apps to it from App Store which needs Software Update 2.0 or higher, minimum. The salesman probably did mean third-party apps, but the App Store is open to all with an iTunes account.
Winterboard? Is that the app you use for the backgrounds?