Will the iPod nano 1g replacement program cost me $100

In the email it sends me after I signed up for the replacement program it states:

Apple may charge you a diagnostic fee, including shipping charges, of no more than one hundred ($100) dollars US, plus applicable tax, if Apple inspects your product and determines based on the inspection that the product does not require service. If Apple determines, while inspecting your product, that service is needed due to the failure of parts that are neither supplied by Apple nor Apple-branded, Apple may return the product to you without servicing it, and may charge you the diagnostic fee plus applicable sales tax.

You are entitled to a written estimate of the cost of repairs. The estimate must include all costs for parts and labor. Apple will not charge for work done or parts supplied in excess of the estimate unless you, the customer, approve the additional charge. This estimate of repair charges is valid for 30 days from the date of estimate. You must notify Apple if you claim a tax exemption and provide Apple with a tax exemption number at the time you receive this estimate. The cost of shipping is included in the estimate.

How do I know if my product needs service? Are they going to charge me $100 if my battery isn't faulty?