This is caused by accidental damage to the headphone port, i.e. you or your use of it broke the iPod. Normally by leaving the headphones plugged in all the time causing wear and tear.
If you want to see what happens inside your iPod then get a old metal spoon and bend it back and forth about 10-20 times, if its still in once piece your lucky if its snapped of then this is what happened to your iPod, the metal got stressed and snapped after repeated bending, this metal is your headphone jack connectors.
DONT PANIC!
All is not lost though however the headphone port cannot be repaired easily or cheaply...
You can buy a device called the radio remove, it plug into the dock connector and provides a remote control, fm radio and an additional headphone jack which will not be affected by the damage the top one.
The loss of sound is normally in the right headphone and is frequently caused by using headphones with long connectors as they cause a lot of leverage. Using over ear headphones with the larger phono jack and a converter is a near guarantee to experience this issue.
