There's a small light-colored dot inside many gadgets, including iPods, that turns pink or red if the device's internals seem to have been exposed to water or significant moisture. Generally, they're put there so that a service technician can end their search for the cause right there.
But aninternal policy change at Apple suggests that having a good argument as to why water isn't the issue may keep your iPod moving along the support and repair path. Very cold days and other innocuous events have been known to trigger the Liquid Contact Indicator (LCI), so it's a nice move toward fairness for Apple. Have you talked your way out of seeming water damage before? [9to5 Mac via Slashdot]
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