It appears that the Touch can act as a server so a USB drive plugged into the Touch, and running a scaled down squeezecenter (called Tiny Squeezecenter), will allow one to bypass having to run a computer as the server (need a computer to setup initially however).
No computer is needed for the setup. An active internet connection may be required for the initial setup so that the latest firmware can be downloaded, but I think the jury is still out on whether this will be required or not by the time the player ships.
Further, the Touch can also serve your music files, by acting as a simple NAS drive, to any other Squeezebox device (less SB1 and SB2).
It doesn't really act as an NAS, it acts as a Squeezebox Server (new name for SqueezeCenter). It's expected that the Touch will share the files on the USB and SD cards, so in that respect it's a network file server, like an NAS. But this is mostly so that you can load music files onto the USB drive across the network. Storing other types of files on the drive may not be a good idea, as the CPU power and memory specs of the device are fairly minimal.
The SB2 is functionally identical to the SB3, so the Touch will be able to serve files to it as well. But not the SB1.
The touch can also work traditionally as part of a computer server setup.
That's an important point. It's essentially the replacement for the SB3 (aka 'Squeezebox Classic'), so will work with a Squeezebox Server running on the network on another computer, as in the past.
