Another way to say that someone is not quite "right" in the head. Usually accompanied by a knowing look and a nod along with the hand lightly tapped to the forehead.
Fred would say about Lamont "That boy is touched" if he hooked up with a white girl.
Or if you are trying to explain why you fizzled something at work, you could pat your head and say "I'm touched"
Many people thought the works of Picasso, Van Gogh and Igor Stravinsky were touched because they grasped concepts that were very hard to understand for their time.