Use Settings or restore.
Restoring your Apple TV (2nd generation) to factory settings
On Apple TV, choose Settings > General > Reset, and then click Restore.
Your Apple TV will restore to its factory settings, and will also download and install the latest Apple TV software update. This process may take some time. Do not disconnect your Apple TV's power cable during the restore process.
If you cannot use this process or you want to make sure everyting that was in there is gone, and you have a micro USB cable, try the steps in the next section.
YOU NEED A micro USB cable for this one, (sold separately), you can restore your Apple TV from iTunes:
Disconnect the power and HDMI cables from Apple TV. Note: If you do not disconnect the power cable before connecting the micro USB cable, you will not see Apple TV in the iTunes Source list.
Connect one end of a micro USB cable to the back of your Apple TV, and the other end to one of your computer's USB ports.
Open iTunes on your computer.
Select your Apple TV in the Source list, and then click Restore.
Your Apple TV will restore to its factory settings, and will also download and install the latest Apple TV software update. This process may take some time. Do not disconnect your Apple TV's power cable during the restore process.