Great summary from The Apple Blog:
Using Your Mac Wisely: Video Content | The Apple Blog
of the options you have to get video on iTunes and iPod. For the promise of the iTouch and AppleTV. Content is King and I only embraced the iPod when I could put all of the CD’s I purchased on it. This makes it worthwhile to start watching on the small screen. But I haven’t got one yet. DJ was the first in our house to get an iPod Nano FAT and watch videos. Most of them his own animations.