The 4th generation iPod Touch comes with a built in camera which allows you to take pictures and record video. However, you cannot do that at the same time. Fortunately, there is an easy solution for it.
Just install the "iPod 720p HD Camera" camera app from Cydia and you will be able to take photo with 1280 x 960 pixel resolution and will also gain the ability to take picture while recording video.
How does it work? Just touch anywhere of the preview or the "Photo" button to take a photo. Oh, and it also works with the iPad 2. Of course, to get Cydia on your iPod touch / iPad, you will have to jailbreak it.