A 'lot' is a unit of issue in this case as a supply/logistics term. It means buying a grouping of damaged iPods (say the lot was 25 or 50 individual iPods).

Costco would sell a couple dozen to several hundred iPod Classics, Nanos, and Touches, all in varied condition, as a "lot". At best you could buy these based off of a grade, which just judged their physical condition, but most of the time you were always buying these a couple dozen at a time, sight unseen.

Oh my, I didn't know this was available. Who usually buys these? Third-party refurbishers?

You have to be a business in the state of Washington and sign an agreement with Costco. It isn't a thing they open with anyone and when I inquired about doing this on my own, even with a license, I was turned away at the door by security.

Pretty sure it is a shady arm of Costco.

Why is it shady? It's just like Amazon Warehouse Deals or Apple Refurbished and Clearance, but Costco only sells in bulk

Here's an example: https://www.directliquidation.com/auction/269088-10-pcs-appl...

Lot basically means “a pile of items”.