It means two things...
Subtitles are usually just what the person is saying.
Captions are usually what the person is saying plus other sounds that appear during the movie such as "clock ticking" or "alarm sounding".
Another thing...
Subtitles are already part of the movie, they simply need to be turned on or off.
Captions are a different part of the movie and require a decoder to make it appear.
What is being said is that iPods don't have decoders. So, if you wanted to watch something... make sure it's subtitled.
