Jailbreak is a program that will do everything for you for your iPhone and iPod Touch(Firmware 1.1.4 and below) and even all sizes.
Just visit ZiPhone.org and download the application and you will be one step away from downloading 3rd party applications.

Extra the zip files to a folder and execute the ZiPhoneGUI.

Connect iTouch to the computer and ensure iTunes is running. Click on the Jailbreak button under Actions tab on the left. It will start to Jailbreak your iTouch to allow read and write access.

Now you are ready to add 3rd party applications to your iTouch. You can use this application for your iPhone also. Find the top 3rd party applications by clicking here or Google for it.