My iPod photo’s click wheel stopped working this afternoon, and I was getting ready to make an appointment at the so-called "Genius Bar" at the local Apple store.
A quick search online found the answer to the problem, though, and I figured I’d document it here so more people can find it later:
iPod calibrates its touch-sensitive surfaces when you turn off the Hold switch. Touching the buttons or the touch wheel on a sleeping iPod at the same time that you turn off the Hold switch causes iPod to calibrate to the capacitance of your finger instead of the air. This can cause iPod to turn on but appear unresponsive when waking from sleep.
So the solution might be to just switch HOLD ON and then OFF again, without touching the wheel in the process
In my case, this solved the problem. Beauty!