I purchased a refurbished ipod touch for my 7 year old for christmas and it's disabled. Any ideas on how to unlock it?

If you bought the iPod Touch direclty from Apple, you can take the iPod to them with the recipet and they should be able to unlock it for you.

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

If the iPod the ask for the previous owners Apple ID password, that mean the previous owner did not turn off the Activation Lock

iCloud: Find My iPhone Activation Lock in iOS 7

In that case either get the password or return the iPod