"set-defaults" means to reset the machine back to factory settings. The following must be typed in open firmware:
reset-nvram - This sets up a factory reset of the NVRAM.
set-defaults - Sets the flag so that the defaults embedded in ROM can be returned back to factory default
reset-all - FACTORY reset complete.. and machine reboots.
There are briefly two commands afterward that open firmware throws out at you.. I think it says sharp0020 or something along those lines.. but know that once you type the 3 commands, your firmware resets back to factory defaults. Your preferences might reset themselves under OS X however.