I want to purchase one or the other but want to know what the main differences are. Is the only difference the phone capability? Also what will the prices of each be when they are released in the UK and will these models differ from the US or could I purchase one on a visit to the states and it would work here? Thanks in advance!

The iPod Touch is not a phone and has a larger hard drive (ie. more songs/movies)

This site will tell you what you need to know:

http://www.apple.com/