The iPod Touch is the essential jack of all trades item for kids these days. It is a MP3 Player, Video Player, it has a web browser but only over WiFi, not over the Cell Network. It does have a camera for FaceTalk over WiFi. It doesnt have a built in telephone app, but I am sure there is one in the App Store.
As far as that is concerned, it is what it sounds like. A Store where people go to get Apps that run on the device. They can be anything from games to whatever really. The AppStore for Apple has the largest selection of apps at around 700,000 apps or so. Not saying that all are needed or necessary, but they are there. How many are needed are up to the person. I need the hundred or so apps I have on my device, I do use them all at one point or another in every week. But that is me and not everyone. I know people that have 20 apps and they think that is too much. So there is no telling how many he will "need" as we cant speak for him in that matter.
Same goes for cost. Some apps are free, others cost $1 while others can cost $15 or more. It all depends on the app. You want to research the, check out their website:
App Store Downloads on iTunes
Really there is no saying what apps he will want or what their cost will be. Just make sure that he has his own iTunes Account and that it is not linked to your credit cards. Make sure that you get him the Cards for purchases. Any local Walmart has AppStore Cards in there for anywhere from $15-$50. So get those instead of linking it to your credit card and there is no way he can purchase an app if there isnt funds available. Last thing you want is to have it linked to your debit or credit card and see a couple hundred dollars worth of charges for music and apps.
I hope that is at least a little bit helpful. I dont own one myself, but I did sell them at Walmart for over 2 years working in Electronics. There are plenty of people in one of those stores that can assist you for more information or possibly even have one that they can show you how it operates.