what do i do when the ipod says its temperature is to high?

From here: iPhone, iPad, and iPod touch (4th generation): Keeping device within acceptable operating temperatures

Temperature warning screen appears with the message "iPhone needs to cool down before you can use it", "iPad needs to cool down before you can use it", or "iPod touch (4th generation) needs to cool down before you can use it" (see image):

This message appears when the operating temperature has become too hot. This is a safety mechanism that protects the components of your device. If this message appears, you should turn the device off, move it to a cooler environment, and allow it to cool before resuming use.

Note (iPhone only): When this message appears, the device may still be able to make emergency calls.

B-rock

So what's going on when the iPod says it's too hot... but the device isn't hot to the touch?

The internal temp guage could be faulty or you just might not be able to feel how warm/hot some of the internal components really are.

B-rock

It could be that it is too hot for the components. Not necessarily to the touch.

Try putting it on an air vent and see if the message goes away. I've let mine get pretty hot before and it has never given me that message. Try hard rebooting it by holding the Home and power buttons at the same time until the device reboots. If that doesn't work, try restoring your iPod. If it is still messed up, take it to your local Apple Store as they will run diagnostics for free.