If you download songs, audiobooks, podcasts, and related content from the iTunes Store, the usual format these files come in is the AAC format. However, the iPod touch can handle a few more audio formats than just AAC.
List of Supported iPod Touch Audio Formats
The supported audio formats for the fourth generation and fifth generation devices include:AAC (Bitrates 8 to 320 Kbps)HE-AACProtected AAC (used for DRM copy protection on the iTunes Store)ALAC (Apple Lossless)MP3 (bitrates 8 to 320 Kbps)MP3 VBR (Variable Bitrate)AA (Audible formats 2, 3, 4) / Audible Enhanced Audio / AAX / AAX+WAVAIFF
In addition to these file formats, your iPod touch supports other streaming media services like Spotify and Pandora.