There are pictures floating around the intertubes today that purportedly show a next-generation iPod Touch with no physical home button. It's shown up on CrunchGear and 9to5Mac. And it's almost definitely a fake.
The idea of a capacitive home button the iPod Touch seems like a ludicrous shakeup, something that would lead to an incredibly inconvenient user experience. So much accidental clickage! So much quitting out of apps in the middle of a killer Boggle run! It would also eventually have to roll out to the iPhone—since there's no way Apple would sacrifice synchronicity in their product lines—which would be a whole other disaster of hang-ups and such.
So while these pictures of a 128GB iPod Touch are popping up left and right, don't put a whole lot of faith in it. Especially since you're just a smudgy device and a Photoshop stamp tool away from making your own. [CrunchGear, 9to5Mac]