It means what it says There are many flavors of MP4 format and not all are compatible with the iPod.
Try aother coverter. I use the free HabdBrake program. It has presets for iPod/iPhone and iPhad forum
I have used Handbrake to convert video to my iPhone 4s, it worked fine. Maybe the resolution is too high for your iPod Touch 4Gen, just keep the resolution under 720P and the codec must be H.264, MP4 format. Maybe you can also try to use this video tool, I used the pro version, I just select the profile as iPod Touch 4Gen and convert. it's very convenient.