last time my iphone also facing problem like yours.. it was dead pixels.. i believe last owner has dropped the phone badly. I thought it was water mark but after I use magnifier to zoom at the affected area, I can found that are dead pixels.
hopefully yours are not.. otherwise will cost a lot to change a new one.
anyway, my defected iphone was sold.. but before that, a forumer came across and told me that he was having the same problem with me too. the affected area will become huge after time being..

I used the phone for around 1 month.. other that the dot dot on the screen. the lcd is still running perfect. my phone did not become worst but i have sold the phone.. so have to ask the new owner for more info.

The guy that came across with the same problem with mine, his case is more serious, his affected area is at the middle of the screen, it will become huge and bigger but my one ok..

You can try to use magnifier to zoom at the area and see.. crxr told me a new lcd cost RM750

if ur case is similiar with the ipod.. i think it is dead pixels lo..
need to change a new replacement to get ur problem resolved