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The iPod Classic User Guide explains how to completely erase your iPod on page 61:
The first step is to make sure you have the latest version of iTunes installed on your computer.
Updating and Restoring iPod Software
You can use iTunes to update or restore iPod software.
If you choose to restore, all data is erased from iPod classic, including songs, videos,
files, contacts, photos, calendar information, and any other data. All iPod classic
settings are restored to their original state.
To restore the iPod classic:
- Make sure you have an Internet connection and have installed the latest version of
- iTunes from www.apple.com/ipod/start.
- Connect iPod classic to your computer.
- In iTunes, select iPod classic in the source list and click the Summary tab.
- Click Restore to restore iPod classic to its original settings (this erases all data from iPod classic). Follow the onscreen instructions to complete the restore process.