Click on the nano's name below "Devices" in the left window in iTunes.
Click "Summary" near the top-right of the main pane.
Click "Restore," located near the bottom-right of the "Summary" pane. A pop-up opens asking you to confirm.
Click "Restore" to begin resetting the nano to factory settings. ITunes notifies you upon completion.
Apple releases updated versions of iPods on a nearly annual basis, sometimes sooner. If your device suddenly goes from new to obsolete, you can prepare the device for resale in order to recoup some money to buy the latest model. For this purpose, Apple allows you to restore your iPod to the original factory settings. The device, however, cannot perform this function on its own. Use the iTunes software to reset your iPod to its original packaged state.
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