What Apple iPhone have that iPod Touch doesn't?
Well, some of the costs come from the GSM components that the iPhone has, others come from the production process, which is different.

Then there is the amount of RAM is 512 MB for iPhone and 256 MB for the iPod Touch. Also, the iPhone has a compass. The rear cameras are different - 5 Megapixel camera for the iPhone and 0,7 Megapixel for the iPod.