there are 4 the first has NO external speaker the second is what my daughter has the 3rd my husband has... i see NO significant differeance between my husbands and my daughters except his is a 64gb and hers is 16gb but that said a 3rd generation is newer and therefor has more advanced parts perhaps holds battery charge better and will be supported over all for long then a second generation. The fourth and current generation has a camera on the front of the ipod and you can video chat via skype via wifi also it has a better resolution screen....
personally have a 1st (that i now use for a noise maker juke box lol), a second, a third, and 3gs iphone... andi owuld get the referbished previous generation (which refers to 3rd generation) for a 10 year old... for me i'd spring for the 4th but only because hubby is military and having video chat be so easy would be nice.