Q: Is my iPod Touch considered obsolete now?

I have a 2nd generation iPod Touch(which I just found out, thought it was a 3rd generation), 16 GB, model # A1288.

I have hardly been able to download any apps because it says most are not compatible with my ios.  However, every time I go to update my ipod it says it has the latest software.  I have lots of room left on my iPod, more than half in fact so is my iPod considered a dinasaur now and won't be able to use it much longer?

thanks for any help, suggestions