Update simply replaces the iPod’s current firmware with the firmware version of the Updater you are running. Restore, on the other hand, completely initializes the iPod, by 1) reformatting its hard drive, 2) installing a fresh copy of the firmware version of the Updater you are running, 3) initializing the database on iPod where MP3 data and directory information is stored and 4) resetting all iPod options to the factory defaults.
Warning: When running restore, be sure you have a backup of all songs currently on your iPod! When restore is done, all songs that were on the iPod will be gone! Updated: 09|09|02