This is just like other "visualizer" it only supports microphone input. When trying to use visualizer with music from iPod, you need to play your music and place a microphone near it to have a valid visualization, otherwise it just displays random graphics.
Please do NOT advertise it as the only visualizer that works with iPod library.
Very--Dissapointed about Audiogasm: Music Visualizer - Real time animation of audio and music for iPhone, iPod touch, and iPad