Sometimes, an iPod Touch can stop responding by locking itself out completely. In this case it is possible to force restart it using a special key combination. If your iPod frequently exhibits malfunctions, you may want to consider performing a factory reset to restore it to the original state it was in at the time of purchase. You can perform this step directly from your device's Settings app or through iTunes.
Steps
Method 1 of 3: Restart a Locked iPod Touch

Step 1. Press and hold the "Sleep / Wake" button
It is located on the top of the iPod case and is normally used to turn the screen on and off.

Step 2. Press and hold the "Home" button
This is the large button located in the center of the bottom of the iPod, exactly below the screen.

Step 3. Press and hold both indicated keys until the Apple logo appears on the screen

Step 4. Wait for the iPod to complete the boot process
Method 2 of 3: Initialize and Reset an iPod Touch

Step 1. Launch the Settings app

Step 2. Tap "General"

Step 3. Select the "Restore" option
To access this item you will have to scroll through the "General" menu to the end.

Step 4. Choose the "Initialize Content and Settings" item

Step 5. Enter the passcode
Before you can proceed, you will be asked to type in the same code you need to use to unlock the screen when you want to access the device. If you have enabled the "Restrictions" feature, you will be asked to provide the relevant security code as well.

Step 6. Press the "Initialize" button, then press the second "Initialize" button that appeared
This is a verification procedure that serves to confirm that you want to completely format the internal memory of the device resulting in the loss of everything in it.

Step 7. Enter your Apple ID login password

Step 8. Wait for the iPod Touch to complete the initialization process
After the device restarts, a progress bar will appear below the Apple logo showing the progress of the initialization procedure. The initialization process can take several minutes to complete.

Step 9. Perform the iPod Touch Initial Setup
Once the initialization process is complete, you will be guided through the steps of initial device setup.

Step 10. Choose to restore your iPod using one of the backup files or set it up as if you just purchased it
After choosing your language, country of residence and connecting it to a wireless network, you will have the option to restore a backup stored on iCloud or iTunes or continue the configuration as if you had just purchased it. Remember that, in order to perform the restore, you will need to have a previously created backup file.

Step 11. Wait while the applications are automatically installed
If you chose to restore your iPod using a backup, all apps on the device when the save file was created will be reinstalled automatically as soon as the restore process is complete. This last step may take some time, but in the meantime you will still be able to use any application that is already available.
Method 3 of 3: Initialize and Restore an iPod Touch Using iTunes

Step 1. Connect the iPod Touch to the computer on which iTunes is installed

Step 2. Launch the iTunes program

Step 3. Press the icon that identifies your iPod Touch

Step 4. Press the "Restore iPod" button

Step 5. If prompted, press the "Verify" button

Step 6. If you intend to restore your personal data, after the initialization is complete, press the "Backup" button
This will create a new backup file that can be used to restore the device once the initialization process is complete.

Step 7. Press the "Reset" button to confirm your will
The iPod will begin the recovery process.

Step 8. Perform Initial Device Setup
After initialization is complete, the iPod initial setup wizard will start.

Step 9. If you have created a backup file via iTunes, choose the "Restore from iTunes" option
This will display the complete list of all backups available for restore. Select the one you want to use to restore.
The process of restoring an iPod using a backup file can take up to 10 minutes

Step 10. Please wait while all content is automatically synced
When restoring an iPod from iTunes, all the contents of the library are automatically synchronized; when you can log in to the device again, all your personal information will then already be available. The time required to complete this step varies depending on the amount of data that needs to be transferred.