Restore simply restores your phone to it's original state. All contacts, music, movies, etc. will be erased/removed from the phone.
The reason you want to do a restore is to make sure your iphone is updated to the current firmware version 1.1.4
1.Get your iphone
2.plug it into your mac/pc
3.itunes will launch (mac) not sure if you'll have to fire itunes up on pc or if it's automatic.
4.setup your new phone (will answer questions, setup your phone number and activate your phone)
5.Now your good to go, you can use your phone, but wait, you want to jailbreak your phone to "unleash the power".
6.restore your phone, via the option you will see in itunes if your iphone is plugged in. Restore will erase the phone again (since you have activated the phone and set up your account, you won't have to go through the whole iphone setup gig again, it simply wipes the phone clean.
7.go to ziphone.org and download the current version of ziphone.
8.install ziphone, it will do it's thing (takes 10-20 minutes)
9.now you will see a new app, installer (icon) on your phone, go into installer and start installing any and all apps to your hearts content.
That is it!
NOTE: Since your phone will be brand new, once you have set it up and activated the phone you could very well just visit ziphone.org, install and start loading apps without having to restore (ONLY BECAUSE YOUR JAILBREAKING IT RIGHT AFTER ACTIVATING IT THE FIRST TIME)
Hope this helps you out man, get that phone, your going to be stoked!
WORD
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