I guess i should have specified. I was curious about the moto droid.
No worries, you're in the Moto Droid's How-to section anyway.
Anyway, I'm pretty sure hard and soft are both types of factory resets. They're just done in different ways. Hard reset can be done if your phone won't boot into the actual Android OS.
Hard reset: Power off the phone. Hold down the x button on the keyboard. Keep holding it down and press the power on button. Keep holding down x until you get a weird icon of an exclamation point in a triangle above a phone on the screen. Mess with the volume up and the camera button (I managed to do it just by pressing both simultaneously) until you get a menu with 4 choices in it. Hit wipe data/factory reset, confirm, let it do its thing, and you're done. On a side note, the apply sdcard:update.zip item in this menu is how you apply update packages on your SD card, which is nice because that's how we usually get unofficial updates, roots, etc. to happen. Keep this menu in mind for if/when you decide to root.
Soft reset: While the phone is still powered on, hit menu, go into settings, then go into privacy (I have no idea why they put it in such a stupid menu choice, it took me forever to find it), hit factory reset data.
Both of them accomplish basically the same thing, the phone will be as it came out of the factory. Hard reset is just done with a "recovery menu" in case you can't boot into Android OS, cause if they didn't incorporate this then a bad program that messes up the bootup process (happened to me with a bug in Home++) could brick the phone.