Which generation Nano do you have?
You can only hack a 1st Generation iPod nano.
There are 4 generations
1st gen - Looks like that
2nd gen - Looks like that but doesnt have aliminium backing
3rd gen - Fat little nano
4th gen - The brand new nano.
You can put Pacman, Doom 1 and 2 and GB/GBC games.
The chances of newer gens being hacked are slim, thanks to the iPhone/iPod Touch.
To do this, you need to install a replacement firmware called Rockbox.
When installed, you can switch between stock iPod OS and Rockbox