Looks like Apple is trying to simplify the lineup, unload some extra inventory, or just get more iPod touches in the hands of everyone:
Apple today announced its 16GB iPod touch is now available in vibrant colors and equipped with a 5 megapixel iSight camera for just $199. The entire iPod touch lineup features the 5 megapixel iSight camera with 1080p HD video recording, brilliant 4-inch Retina display, Apple’s A5 chip and FaceTime camera. iPod touch features an ultra-thin and light anodized aluminum design and is available in pink, yellow, blue, silver, space gray and (PRODUCT) RED. iPod touch comes in a 16GB model for $199, 32GB for $249, and 64GB for $299.
For those keeping score at home, the iPod touch is sort of a weird mix of iPhone 4 (5 megapixel camera), iPhone 4S (A5 processor), and iPhone 5 (long display) and hasn’t had an update since the iPhone 5 was released…unless you count the prior low-end model.