5 years later and you can buy the bigger, better, 2 camera iPad Mini for exactly the same price (in Canada).
The iPod touch is portable. The full size iPad is not. You need a bag. The iPad mini will fit in a jacket pocket.
The iPod touch and the full size iPad have retina display. The mini does not. Once you go retina (or an ereader like the Kobo on Kindle), you really notice those little squares.
So, should you get the $300 iPod touch, the the $330 iPad mini or the $500 iPad with Retina Display (aka 4th generation). Or should you get one of the junkers made by the competition.
If you will be using your tablet to watch movies, there is a lot of wasted real-estate. So smaller 7 inch tablets would do just fine (unfortunately, no Netflix on the cheap Blackberry Playbook). Unfortunately, the iPad mini keeps the same ratio as the iPad full size, so those black bars will still be visible, defeating, in a sense, the whole point of smaller tablets.
Not knowing your needs or resources, here is my recommendation: Get an iPhone. For kids, a 4 inch retina display iPod touch. If you can afford it, for home use, an iPad retina display (for reading in bed or on the can). The iPad mini fills a niche because it will fit in your jacket pocket. In the fall, winter and spring, you can take it everywhere, just in case. You can use it to show off pictures, for example. The competition has better 7 inchers for less money, but they lack software (aka games).
If the iPad Mini had retina display, it would be a much tougher decision. But it doesn't. That said, I own an iPad first generation and use if every day (ditto for my iPhone 4s). However, I'm totally counting my pennies to buy the new iPad with retina display. Those little squares are getting annoying.