Yea i used Limera1n. It worked well for me. Some people reported problems but it worked fine for me outside of a few minor bugs that didnt hurt the overall experience and seemed to fix themselves. Im on Ipod Touch 4g 4.1 firmware.
As for Payasos question. Jailbreaks allow you to get emulators and games for NES, SNES, Gameboy Advance, etc.. working on your ipod.
As well as add new features that apple didnt include on your ipod and if you know what your doing you can get all the Itunes app store apps free illegally yes but free.