What Apple's website itself actually says is..
Quote:
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A charge cycle means using all of the battery’s power, but that doesn’t necessarily mean a single charge. For instance, you could listen to your iPod for a few hours one day, using half its power, and then recharge it fully. If you did the same thing the next day, it would count as one charge cycle, not two, so you may take several days to complete a cycle. Each time you complete a charge cycle, it diminishes battery capacity slightly, but you can put both notebook and iPod batteries through many charge cycles before they will only hold 80% of original battery capacity
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So what it's actually saying is that doing it more often doesn't improve it or diminish it and that both ways work in exactly the same way.
And you can't totally drain the battery on an i-pod , it shuts itself off before that happens.