There are many different reasons that a phone may need to have a factory reset performed. You may be experiencing too many issues with apps loading slowly, or malfunctioning when they finally do load. Or perhaps a friend or customer service person suggested the process to help with connection issues. Luckily, a factory reset doesn't actually involve sending your phone off to the factory, just these few steps that you can do at home:
Important note: Make sure you save any information that does not sync to the cloud on your phone before performing this process. Your photos on the SD card will be fine (unless you choose to format it), but text messages and other settings will not be saved. If you'd like to save these kinds of things, you can do so using an app like MyBackup Pro. It's recommended that you reinstall apps once the reset is done--instead of backing them up--in case one of them is actually causing the issues you're experiencing.
1. From the Home screen, press the Menu button and go to Settings.
2. Select Privacy and then Factory data reset.
3. Verify the information on the screen and press Reset phone.
The process may take a few moments, but the phone will eventually reboot and ask you for your credentials. Once logged in, if you selected for apps to restore themselves, they will begin downloading after opening the Android Market and agreeing to the Terms of Service again. Additionally, any other services you had synced to the phone will restore their data as well.