Most dockable iPods--including the third- and fourth-generation (4G) iPod nano and full-size iPods as far back as the third generation--let you use a third-party microphone accessory to record audio. The quality of these recordings can be surprisingly good, but if you've got a 4G nano, which costs as little as US$149, you're looking at spending a significant chunk of the price of the iPod itself--most iPod mics cost $50 to $70--for a microphone that's bulky and ill-fitting when used with a nano.
Provided you don't need to record in stereo, consider instead Incipio's Lloyd, which, at just $18, is a veritable microphone bargain. Available in white or black, the Lloyd is a tiny, mono microphone that plugs into the multi-function headphone jack on the bottom of your 4G nano; a plastic nub fits into the nano's dock-connector port to keep the Lloyd in place. At almost exactly the same width as the nano itself, and just ever-so-slightly thicker, the Lloyd complements the iPod's shape while increasing its length by only half an inch. (Because the Lloyd requires that the entire bottom edge of your nano be accessible, some cases won't fit with the Lloyd attached.)
Once the Lloyd is connected, you use the nano's built-in Voice Memos software to make and manage recordings; the Lloyd itself has no controls.
The Lloyd's pass-through headphone jack means you can actually leave the microphone connected to your nano all the time, but there are a few caveats. Because the Lloyd's headphone jack is mounted on the side, rather than the bottom, some headphone plugs may jut out more than you like. And since there's no pass-through dock-connector port, you'll need to remove the Lloyd to sync your iPod with your computer. Finally, the Lloyd's headphone jack doesn't pass remote-control signals from the inline remote found on Apple's iPhone headphones and In-Ear Headphones with Remote and Mic. But the Lloyd shares some or all of these issues with every dock-connector microphone I've seen, and unlike those other mics, the Lloyd is so tiny you can disconnect it and carry it in the coin pocket of your jeans.
Of course, small and inexpensive is great, but when you're talking about a microphone, you don't want to sacrifice recording quality for a low price. Thankfully, the Lloyd's performance is quite good. While obviously designed for basic voice recordings--interviews, voice notes to yourself, and the like--during my testing with a normal speaking voice from a couple feet away, the Lloyd's recordings were loud, clear, and natural-sounding. When I increased the recording distance to 4 feet, a normal speaking voice was still clear and understandable, if softer and a bit more hollow-sounding.
Once I moved across the room, recordings of normal voice levels became fainter and considerably hollower, although louder audio--for example, a voice over a PA system--was still clear. In all cases, the Lloyd performed much better than the inline microphone on Apple's In-Ear Headphones with Remote and Mic. (Basic voice recordings made with the Lloyd also fared well when compared with those recorded using more-expensive stereo microphones for full-size iPods.)
The Lloyd is a standout iPod accessory: functional, affordable, and easy to use. If you're looking for an inexpensive way to take advantage of your iPod nano's voice-recording feature, the Lloyd is well-designed, it offers great performance for the price, and it's compact enough to squeeze into the smallest of pockets. What's not to like?
(Although designed specifically for the 4G iPod nano, the Lloyd also works with the most-recent iPod touch and iPod classic models, as these models use the same multi-function headphone jack as the nano. However, because these iPods don't have the same relative positioning of the headphone jack and dock-connector port, you have to position the Lloyd oddly--plugged into the headphone jack but rotated slightly so the Lloyd sticks out a bit from the body of the iPod.)