It could be that the digitizer broke (cracking), at least certain areas. In this case, you need to buy a new digitizer and LCD unit (both are glued together and also available as one unit; see here: http://www.ebay.com/itm/For-iPod-Touch-4...
The costs for a replacement are about $20.
The other possibility could be that the connector of the digitizer (which is fixed to the motherboard from below) got loose. I would check this out first. However, the connector of the digitizer is held to the socket by an extra copper ribbon - see step 12 of this guide:
iPod Touch 4th Generation Front Panel Replacement
I recommend that you follow this guide, but be very careful and take your time (category: Difficult).