She watches videos, "reads" books (scanned images of picture books), plays games, listens to music and practices "typing". It's now a spare, so it doesn't have a calling plan. So just like a video iPod really.
I can tell you that multi-touch has been a lot easier to teach than mouse use.
Have had the same experience with multi touch interfaces and my kids: they instantly get it. They drag things around, stretch, move etc... all without being told.
Will be interesting to see what the future holds - perhaps the idea of a separate mouse to a screen will be seen as quaint one day.
The funny thing is the mouse should be a a very basic instrument - its basically point and grunt. But the dexterity required for kids is a bit of a step - touch seems to make it even more intuitive.
