Factory reset erases all personal data from the phone's memory such as contacts, apps, and account info. It doesn't unroot the system. If you were to flash back to a stock ROM or upgrade the official you would then lose root. Also, if you don't want to lose your sdcard data unmount and remove it prior to factory reset. The name is a little misleading as it doesn't truly restore the device to a "factory" fresh state.
~# rm -rf /media/Windows