What does erase and reset doo purchased items such as apps?

Erasing all contents and settings will wipe everything from the iPad but the iOS. It does exactly what it says. You can download all of your apps and data again if you backup with iCloud or iTunes. Erasing content and settings can be a troubleshooting step as well. When you erase all content and settings, you have to go through the set up assistant all over again.

IF you have no backup at all, you should create one before you erase the device, if you intend to continue to use the device. Apps are tied to your Apple ID and as long as they are still available in the App Store, you can download then again for free. The data is what you really want to backup.

You're welcome. If you need more information, post back.