When talking about jailbreaking an iPod, it means to unlock it from someone else and use it for your own personal use. Jailbreaking dissolves any current warranties, and if you have an iPod that is a jailbreak version you cannot return it to the store for any repairs or replacements.
Jailbreaking an iPod can be described as unlocking the iPod's potential. It allows you to customize your iPod in ways you couldn't before by downloading apps that aren't approved by Apple. Once you jailbreak your iPod, you void its warranty.