Yes, if there are more than 5 people in Level 3, the others will get iPod Touches. They will also be entered into the raffle.
To figure out who the "top 5" are, we'll look at the posts you made for the contest and figure out the total combined score (so if all 35 of your posts had a score of 6, your combined score would be 35*6 = 210). The 5 who have the highest combined score will get an iPad.
Sorry it wasn't clear before. Make sense now?
Edit: I've been told some people still have questions, so just to clarify - this is the score that your contest posts have. It's not your reputation or the votes you have cast, only the score on the posts that you have made.
The posts that will count for the tie breaker are the highest-scored posts you made during the contest. For Level 2 that will be the top 20 posts and for Level 3 that will be the top 35 posts (excluding deleted posts, closed questions, and answers to closed questions).