Indeed it does. That's one of the marquee features in this generation of the iPod touch, thanks to a new dedicated FaceTime app. Unlike FaceTime on the iPhone 4, however, which up until now has used phone numbers to initiate FaceTime calls, FaceTime on the iPod touch is based on e-mail addresses.

When you first launch the FaceTime app on the touch, you're asked to enter your e-mail address. (You can add more e-mail addresses by entering them in the FaceTime section of the Settings app.) To make a call just open a contact (you can choose contacts from Favorites, Recents, and Contacts screens within the FaceTime app or select a contact within the Contacts app). On the contact's screen will be a FaceTime button. Tap it to initiate a FaceTime call. Alternatively, if you know that the person you're calling has an iPhone 4, you can simply tap that phone's number in the Contact screen and the iPod touch will place a FaceTime call. All you need is a Wi-Fi connection.