Q: my daughter forgot her pass code and now it says ipod is disabled

Disabled

Place the iOS device in Recovery Mode and then connect to your computer and restore via iTunes. The iPod will be erased.

iOS: Wrong passcode results in red disabled screen                         

If recovery mode does not work try DFU mode.                        

How to put iPod touch / iPhone into DFU mode « Karthik's scribblings        

For how to restore:

iTunes: Restoring iOS software

To restore from backup see:

iOS: How to back up     

If you restore from iCloud backup the apps will be automatically downloaded. If you restore from iTunes backup the apps and music have to be in the iTunes library since synced media like apps and music are not included in the backup of the iOS device that iTunes makes.

You can redownload most iTunes purchases by:

  Downloading past purchases from the App Store, iBookstore, and iTunes Store