An iPod is limited by the size of its hard drive, but its content can be decreased in size to give the iPod additional storage capacity. The iPod optimisation feature in iTunes 10 reduces the size of unprotected audio files by converting them to 128 kbps AAC files. This method uses less space but maintains audio quality. The conversion affects the songs on your iPod but does not convert the songs stored in iTunes.
Insert the dock connector cable into the iPod and the computer's USB drive.
Open iTunes. Select the iPod's icon in the side menu of iTunes, then click "Convert higher bit rate songs to 128 kbps AAC."
Click "Apply" and wait for iTunes to scan and convert the higher bit rate audio tracks on your iPod to the new format.
Click "Eject" after the conversion is complete and the iPod displays a "safe to disconnect" message.