Make sure you have Software 2.0 installed in your iPod Touch and your iTunes playlists shared.
To share your iTunes playlist:
- Click on iTunes Preferences.
- Click the Sharing icon.
- Check "Share my library on my local network".
- Click OK.
Next, download Remote from the App Store:
- In iTunes, go to the App Store (click Applications and click "Get more applications" in the lower right of the iTunes window).
- Look for the app called "Remote" and download it.
- Install in your iPod Touch.
Now go to your iPod Touch and tap on Remote. Follow the easy instructions in your iPod Touch. Once you're connected, you'll see the playlists shared in your computer. You can browse and play any of the songs available.