Ipod touch with white lines after SMALL drop

While there's no way of knowing "why" for certain until the iPod has been inspected by a competent technician, I would speculate that the device has suffered internal damage (or damage to the screen itself) as a result of the drop.

Although you state that it was a small drop, if the iPod fell onto a concrete floor the impact is likely to be worse than if it fell onto a soft carpet. Those are two ends of a scale; the amount of damage incurred will be dependant upon how far along the scale the floor was that your iPod fell.