The iTunes Restore button
Clicking the iTunes Restore button is the equivalent of telling your computer to Format a hard drive.
An iPod Restore erases the iPods drive structure. After an iTunes restore you should end up with an empty iPod, just like when it was new in the box.
The iPod restore command is usually accompanied by a warning such as this:
After an iPod restore you are in one of two situations:
1. You have a clean iPod, but still have your files in your iTunes music library.
In this case you don't have a problem as you can connect your iPod to your computer and re-sync with iTunes.
2. You have a clean iPod, but no longer have your songs or files on your PC.
In this instance you need iPod recovery software. The Restore command however does not actually erase the data from your iPod. The data, including music and video can be recovered.
Download Recover My iPod and follow the Quick Start Guide to Recover My iPod.
Do Not Connect your iPod to iTunes
Why? The default setting in iTunes when an iPod is connected is to "auto-sync" the play list. This means that iTunes will try and write it's list of songs to your iPod.
It is important when performing iPod data recovery not to write new data to iPod drive unless it is necessary to do so.
Do not connect to iTunes unless we specifically give instructions to do so.