Confusing, right? For the purposes of this article (and your sanity), I'm limiting the buying-guide analysis to the non-phone iOS gadgets: the iPods and iPads. It used to be that there was a huge gap between the 3.5-inch Touch and the 9.7-inch iPad. Now there's a spectrum: 4 inches, 7.9 inches, and 9.7 inches.
So, let's look at each one, starting with the newest.
Pros: A sweet-spot size; Kindle-like portability; full compatibility with all iPad and iPhone apps; good battery life; and a price that's pretty low (for Apple).
Cons: This is the only new iOS device without a Retina Display; it's not as fast as the newer, larger iPad.
Who should buy it? Anyone who wants to save money, obviously, since it costs less than the fourth-gen iPad. If you don't mind not having a Retina Display, or are considering a second iPad...or if you have kids...or if you're a heavy public transit commuter...the iPad Mini is a very tempting pick.
Recommended storage: 16GB should be fine for many, unless you plan on storing lots of games, graphic novels/textbooks, or videos.
Pros: Blazing speeds; a beautiful Retina Display; impressive gaming graphics.
Cons: Heavier; bigger (relatively speaking); not that much different from the last iPad.
Who should buy it? If you've never owned an iPad before, the fourth-gen is a perfecting of the third-gen version from March. It's an excellent portable computing device, reading/viewing tablet, game player, and all-purpose tool. However, if you own a third-gen iPad, it's not worth the upgrade unless you're made of cash.
Recommended storage: Because of the size of many HD videos and games, go with 32GB or larger.
Pros: A 4-inch Retina Display that matches the iPhone 5's; a solid camera with LED flash; good battery life; general iPhone-like functionality minus the phone; 32GB of base storage; and it's incredibly thin and small.
Cons: Not as fast as the iPhone 5; lacks cellular.
Who should buy it? The iPod Touch is really a phoneless iPhone. Therefore, iPhone owners really need not apply. It's for music lovers, those who like ultra-portable gadgets, those who value more storage over larger screens like the iPad Mini's for their money, those who want the least-expensive new iOS device, period. It can be used as an e-reader in a pinch, and a Web browser, but it's not as comfortable or versatile as an iPad.
Recommended storage: The base 32GB on the fifth-gen version should be fine for music and games/videos. If you're using it as a video camera, too, go with 64GB.
And now, for some quick-hit recommendations.
If you're a Windows user and iOS-curious: buy an iPad Mini.
If you want to show off your hottest toy: buy an iPad Mini.
If you value speed and performance: buy a fourth-gen iPad.
If you have a desktop and want a laptop alternative: buy a fourth-gen iPad.
If you own a MacBook Air and an iPhone: buy an iPad Mini.
If you want to buy your first iPad, and want the best: buy a fourth-gen iPad.
If you're buying your second iPad: buy an iPad Mini.
If you're on a budget: buy an iPad Mini or consider the iPod Touch.
If you're a music addict and don't have an iPhone: buy an iPod Touch.
If you just care about music, not videos/photos: buy a fourth-gen iPod Touch.
If you want the best camera: buy an iPod Touch.
If you don't have a smartphone: buy an iPod Touch.
If you want the best universal e-reader on the go: buy an iPad Mini.
If you want Retina Display but don't want to pay a lot: buy a used third-gen iPad.
Hope that helps.