Sorry, but I have to start with a bit of a rant: there is no such product as an "iTouch". My kids talk about this too, but the actual trademarked name from Apple Corp is the "iPod Touch". iPod Touch. Not iTouch. Got it? :-)

I know what you're talking about with the date and time, though. The date you're seeing is "time zero" on devices, as it turns out. It's a Unix thing, actually, but time is calculated as the number of seconds since time zero, which is actually midnight, January 1, 1970. But that's Universal Time, Coordinated (UTC) so back it up for Cupertino time (California, Pacific Time, where Apple's HQ is located) and that turns out to be eight hours earlier, or 4pm, December 31, 1969. Now you know!

Back to your problem, though. To fix the date and time on an iPod Touch is quite similar to fixing the date and time on an iPhone, though in the latter case the cellular network should automatically keep it in sync.

On the Touch (see, not "iTouch" :-) look for the Settings icon:

Tap on it and find "General":

Moving into General settings, look for "Date & Time":

Now you can see some of the basic settings here:

First off, tap on the Time Zone if it's wrong, then type in a few letters of the biggest city you know that's in your own time zone. For me it's "Denver, Colorado":

Reunion Island? Maybe I should live there. And invite a bunch of friends and family I haven't seen for a long time. Or not. (Turns out Reunion Island is east of Madagascar, very near Mauritus)

Once you've set the time zone correctly, tap on "Date & Time" on the top left and choose "Set Date & Time":

You'll see something similar to what I'm showing, a date at or very near December 31, 1969. In this case you can see that the iPod Touch has only been alive to start incrementing the date/time for a short period of time. Still, it's not the correct date and time (heck, the Web didn't exist back in 1969!)

First off, set the time correctly against another clock by spinning the values as necessary, then tap on the day and date to adjust that setting:

Looks good! Tap on "Date & Time" again on the top left and now your iPod knows the correct time, as you can see on the lock screen:

Hope that not only helps you understand how to fix the date and time on your iTouch (cough) but why 1969 shows up as the default date when the unit wakes from dead.