So 2.1 adds the Genius Feature to the iPhone & iPod Touch.
FYI, you need to sync it once after you load 2.1 for Genius to be activated on your device. Now, where to find it?
Play a song in the iPod. While it's playing, tap the cover art anywhere to bring up the timer. You'll see the Genius icon right in the middle underneath it.
Tapping the icon brings you to a iPhone/Touch generated playlist of the music you have on your device.
From here, you can refresh it, save it, or start new. The more people that eventually connect to iTunes with your song, the better your results will be. I came up with a couple that asked me to try back later after more data is compiled.
If you do wind up saving the playlist, it shows up in your playlists section with a Genius icon next to it. It also auto names it based off the song you selected.
Have fun!