Hello there chelseap148,
Heres a great article about that very issue named iPod Displays a Red "X" Icon. You can find it here http://support.apple.com/kb/ts1463.
Restore iPod from Disk Mode
- Disconnect iPod from your computer.
- Manually put iPod into Disk Mode.
- Open the latest version of iTunes and connect iPod.
- Restore iPod.
Setup Service for iPod
If you cannot force your iPod into disk mode and restore it, then your iPod may need service. Click one of the links below to setup an iPod Service Request online or make a reservation at the Genius Bar before visiting your local Apple Retail Store.