Well the 4th and 5th generation as appose to the 3rd generation, the 4th and 5th generation have both front and backside cameras, iMessage, bigger screens, longer battery life, as well as better graphics and it's way easier to connect to WiFi, also it has better sound quality and better picture quality, also there's a option to get iPods with more memory like in the 4th and 5th generation. Again with the screen size differential there's the cases thing too. There are many more differences between the 4th and 5th as appose to the 3rd.
Well, if you are talking about Ipod Touch's the difference inbetween 3-4 is that 4 has a camera and inbetween 4-5 5 has siri and it also has better quality for photos. You can also get more gb on the 5th than the 4th.