Here are the instructions for folks who don't want to click on the link:
Hardware hard reset method
1. Turn the Droid off. If it won’t turn off, take the battery out then place it back in.
2. Open the keyboard and press the X key while pressing and holding Power. The device will power on. Keep holding the buttons down until a yellow triangle appears on the screen.
3. Press the Camera and Volume Up buttons at the same time to get to the menu. (I had to press them several times to get it to work).
4. Use the direction pad to the right of the keyboard to select the Format option.
Software hard reset method
1. Open the Settings app from Home > Menu or tap the application slider and select the Settings icon.
2. Select Privacy.
3. Choose Factory data reset.
4. Select Reset phone.
— modified on Mar 28, 2012, 12:30:27 PM