For those of you who either forgot your iPod Touch password (or happened to pick up a free iPod Touch on the streets somewhere although I highly advise you to try to return it to the owner for karma), there’s a real simple way to hack your iPod Touch without knowing the password, by restoring it to its factory state.
To do this, make sure your iPod Touch is connected to your computer and iTunes is turned on.
Then hold down the center button and the power button together for about 20 seconds. This should put your iPod Touch into DFU mode, from there you can hit “restore” on your iTunes and get the iPod back into factory state.
Btw, this should work on all types of iPods too.