All the Apple devices including the iPhone, iPod and iPad share some peculiar similarities in terms of design and functionality. Apple has included a front-facing and regular camera to the iPod touch because of which, it has even more similar to the iPhone. The calling facility is the only minor thing missing in the iPod which is creating the difference between the two devices. There are some apps available which can convert your iPod touch into an iPhone. With some minor adjustments here and there, your iPod touch can become a full fledge iPhone – without jailbreaking the device. By using the VoIP (Voice over IP) applications like Skype and Line2 you can even make calls from the iPod touch.

Resources required
An iPod touch – Our main focus would be on (4G) hardware, but any iPod touch can be used.
VoIP App - Skype and Line2 applications will be used, but we can consider other possibilities also.
A Constant Wi-Fi Connection - Your home Wi-Fi network can solve the purpose but we would suggest a Wi-Fi which you can take anywhere for making the calls.
Extra: An iPod-compatible Headset – iPod touch is not a phone and it doesn't have inbuilt speakers. So you should arrange an iPod compatible headset and earbuds (of Apple's or anyone's, Bluetooth or wired) also.
Methods
There are many available options for making this iPod transformation, like Wi-Fi and Skype. Assure that you know most of them:
Skype

Skype is the most popular application which is used for making national or international free calls. Some nominal charges are levied when the user calls a phone number. connectivity on Skype may sometimes become annoying due to the network related issues. Calls made between Skype to Skype user is absolutely free but messaging is quite costly- at $0.112 per message. You can download this application at iTunes Apple Store for no cost.
Fring

It was Fring application only which initiated the features like: VoIP calling and video chatting over 3G. Although it doesn't include SMS facility but still it is amazingly compatible with communication mechanisms like Gtalk. For SMS texting you would have to rely on messaging services like: AIM, MSN, ICQ and other social netwrks. Quality is not an issue with Fring and by having an SIP account you can start performing calls.
Line2

Line2 has been specifically built for the applications from which many users of US and Canada are already being benefited. Unlimited calling and text messaging is possible with Line2 (in US and Canada alone). All you have to do is: sign up to Line2 and register the number assigned from their area codes. It is a very reliable application which can even forward calls (with the forward button) if you cannot pick them. The only problem with Line2 is that it automatically forwards the call if it is not operating live at your interface. Then you would have to quit the software for avoiding calls. In an aggregate it is a perfect telecom service which is free to download. But if the user wants to renew his Line2 account than he would have to pay $10 per month.
Maintaining Constant Connectivity
If you want an uninterrupted connectivity on an iPod touch then you should use a possible data plan with a mobile hotspot instead of home Wi-Fi network. The home Wi-Fi is not reliable and it can support the incoming calls only. It won't function properly if it is taken outside the house.
Other Considerations
If you deploy the calling facility applications in your iPod than you should take care of some minor issues. You should answer these questions;how the data is being performed? What is the status of battery life? and finally, what is the finally pocket-ability? Mi-Fi connection can be used for tackling the issues related to data performance – it allows amazing data quality on the iPod touch. To an extent battery life is an issue in iPod touch but still it can manage the battery backup for the entire day.
Other options available
VoIP apps can be extremely effective for converting the iPod touch into a iPhone. You can have an instant phone service functioning inside your iPod. There are also some other alternatives available but they are a bit cumbersome.
Jailbreaking
The Jailbreaking method is a very popular method among the hackers which can deliver much better control over your iPod. Siphon SIP/ VoIP is a Jailbreak application which can be installed via Cydia. Jailbreak needs to be integrated with the OS like a regular application. SIP is a good option and it definitely gives a better result over other applications.
The Apple Peel 520
It is a Chinese device which bestows the 3G data facility into your iPod touch. Apple peel 520 conversion case, packs a GPRS radio and even a SIM card slot for making your iPod into an iPhone. This method is like making a jailbreaking fusion into the iPod after which you will get a perfect iPhone as a result.