How do I back up all my files on my iPod touch before restoring iPod back to factory settings?

How to BackUp > http://support.apple.com/kb/ht1766

What gets Backed Up

iTunes http://support.apple.com/kb/ht4946

iCloud http://support.apple.com/kb/PH2584

DarrellLovesLyn wrote:

... before restoring my iPod to factory settings?

What to do before selling or giving away your iPhone, iPad, or iPod touch

If you have non-iTunes purchases on the iPod like music from CD, you will need a third-party program like one of those discussed here:

Recovering your iTunes library from your iPod or iOS device: Apple Support Communities