You need to updateyour iPod. See:
You need iTunes 10.6 on the computer.
If you have a Mac, you need OSX 10.5.8 or later.
BTW you posted in the iPad forum.
iOS is the operating system that is used on iPod Touches, iPads and iPhones. Some apps require a minimum iOS version to be on a device (e.g. they may use features that were added in a more recent iOS version), if you have a lower version then you won't be able to install those apps (your current version is shown in Settings > General > About > Version). You can update to the current version of iOS, i.e. 5.1.1, via your computer's iTunes.
You will need the latest version of iTunes on your computer - you can check if you are up-to-date via, on a PC, 'Help > Check For Updates', and on a Mac 'iTunes > Check For Updates'
When you have that installed, connect the iPod to it and copy any purchases off it via File > Transfer Purchases (you may also want to copy photos off the iPod as well) and then force a backup of the iPod by right-clicking the iPod 'Device' on the left-hand side of iTunes and selecting 'Backup'. You may also want to copy off the iPod any important documents, notes, files etc e.g. via the file sharing section at the bottom of the device's apps tab when connected to iTunes, via wifi, email, dropbox etc - they should be included in the backup, but it's best to have a copy of them outside of the backup just in case.
You can then start the update by selecting the iPod on the left-hand side of iTunes, and on the Summary tab on the right-hand side clicking the Check For Updates button.
Updating to iOS 5+ : http://support.apple.com/kb/HT4972