How does the touchwheel and touch buttons on my 3G iPod work?

Contrary to what you may have read they do not work by pressure. They work by using a principle called coupling capacitance.

The touchwheel and buttons contain two layers of electrodes. The top layer is composed of vertical electrode strips, and the bottom has horizontal strips. These two layers form the coupling. An integrated circuit underneath them measures the capacitance from each of the horizontal electrodes to each of the vertical ones.

Capacitance is a measurement of electrical charge, the ratio of stored charge in coulombs to the applied potential difference in volts.

Your finger and the air surrounding it are dielectric materials which are poor conducters of electricity,  and they both have a constant charge. The electrodes in the touchwheel/buttons can detect the difference in the dielectric constant of your finger and the surrounding air.

When you move your finger around the touchwheel or touch the buttons, the capacitance between the electrodes is changed. This change lets the integrated circuit know exactly what your finger is doing, be it scrolling through the menu or activating one of the buttons.

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