There are millions iPod touches (2G) in customer hands. Many of those users would like to be able to make phone calls, direct to land lines and cell phones, on the device, and now it's possible using Wi-Fi. This HOWTO explains how to do it, step by step. In fact, it's very easy and inexpensive.

Here's what you'll need:

1. A Skype Account. (It's free.)
2. Purchase of Skype Credit. (Pay as you go. 2 cents/min)
3. The Skype app from the Apple App Store. (It's free.)
4. For iPod touch only: A compatible headset/ear bud set with microphone.
5. A Wi-Fi connection.
6. iPod touch 2G

Note: this HOWTO also applies to all iPhones, but because the iPhone has a built in speaker and microphone, earbuds with a microphone aren't required.

Step #1. The preferred way to sign up is to go to Skype.com and download the Skype app for your Mac or PC if you haven't already done so. When you launch the app, it'll step you through setting up a free account. (You can use that to make free calls in the Internet to other Skype users. If you've done this before, you're all set.) Once you've registered and have a user name and password, go back to Skype.com and select the "Shop" tab shown below.

Skype.com: Shop

After clicking on "Buy Skype Credit," you'll be asked to sign in with your account name and password.

Sign in to your account

At this point you'll be walked through the process of buying a US$10.00 "Skype Credit." It's a good idea to have a PayPal account because payment options are limited. Even if you select PayPal, Skype will ask for a secondary credit card, where options are better (AMEX, MC, VISA) for a backup in case the PayPal account becomes depleted. This transaction is, of course, encrypted.

After you complete the process, you'll receive an e-mail at your specified e-mail address that your Skype account is enabled with US$10 credit.

Step #2. Go to the App Store on your iPhone or iPod touch 2G and do a search for Skype. This is the app you'll be looking for. After you've downloaded, and you'll want it on the home page, launch it and log in with your new Skype account name/password. It will, of course, recognize that your account has Skype Credit and you're ready to make calls to land lines or cell phones at the rate of US 2.1 cents/minute in the U.S.

Skype app dialer

Note: The iPhone and iPod touch don't have the ability (yet) to come to the foreground when a regular, free Skype connection is made. You can still use Skype for free calls, but you must arrange ahead of time for both people to have their Skype app running and waiting. That's awkward. The procedure in this HOWTO bypasses that and allows you to call anyone's land line or cell phone any time.

The Skype app on the iPhone or iPod touch 2G also has an information page that shows your remaining credit.

Skype app:My Info

Now, all you need to do, assuming you have a Wi-Fi connection, is to insert a headset with a mic (like the kind that comes with the iPhone, available in Apple retail stores) into your iPod touch, bring up Skype's dialer, and chat away!

Step #3. There is no step three! (As Jeff Goldblum used to say.) However, if you want to keep track of your usage in more detail, Skype keeps a detailed log of all your calls. Just log back into Skype with your favorite Browser and click on Your Account.

Skype Account Page (some info obscured for privacy)

Note the link at the bottom to "View Call History." If you click on that, you can see every call you've made and the duration.

Skype: Complete Call History

This all works because Skype uses a technology called Voice Over Internet Protocol (VOIP) which is just digital voice over Wi-Fi instead of over the AT&T 3G network. Both use radio technology -- they're just different frequencies used for voice and data.

Finally, if you're doing this on an iPhone, you can elect to assign a caller ID to your Skype calls that's the same, most likely, as your AT&T iPhone number. That way, people who have you in their iPhone address book will recognize you when you call -- and call you back later, if need be, on your iPhone AT&T number. Setting up Caller ID is done from the Skype account settings and takes about 24 hours to activate.

If you have both an iPod touch 2G and an iPhone, you can install and use the Skype app on both and use them interchangeably.

Now, when you're out and about, say at a Starbucks or a friend's house with Wi-Fi access, you'll be able to make inexpensive, pay-as-you-go calls to anywhere with your iPod touch 2G. This is also helpful if you live in a rural area with poor AT&T reception for your iPhone, but you have a home filled with Wi-Fi thanks to DSL, Cable modem, etc.

This is a lot of service for a start up of US$10.00.

[This HOWTO was updated with additional information from Skype.  The Skype app requires any iPhone or an iPod touch 2G.]