http://www.apple.com/ipodtouch/specs.html
Commercial jet aircraft (transport category) in the US are typically pressurized to 8,000 feet. In part this is due to federal regulations regarding provision of oxygen to passengers and pilot access to and use of oxygen (title 14 of Code of Federal Regulations). With cabin pressurization at 8,000 ft, the touch should work just fine in any typical flying situation.
My guess is that for the specs, these simply state the environmental range for which the touch is designed and has been tested to operate. I'd bet the touch would work at higher altitudes (lower pressures), though what puaerotch said seems reasonable.
Apple could design it to work at higher altitudes, but mostly their core market isn't going to use it in such conditions. Frankly I'd be more worried about the non-operating temperature of -4°F (-20°C), as some people could be expected to leave them in their cars overnight. There are plenty of places in the northern hemisphere that hit and go below those temperatures in the winter.
mac57, you bring up an interesting point about gear for serious mountain climbing types. Panasonic builds the Toughbook line of Windows laptops for rugged outdoor situations. My guess is that a serious mountain climber can find a servicable mp3 player. I just tried Googling "rugged mp3" and found some links that appear to be good.
Fwiw, Zune doesn't show environmental limits. My guess is they're either close or identical to the iPod line. Also, the new nano has the same limit on altitude, and probably similar specs on the other environmental characteristics.