When your iPod Touch is stuck in recovery mode, you can use the iTunes application to restore it and update its software. The application uses your backup files to get your iPod out of recovery mode.
I upgraded to an iPhone 4S recently, and as I would then no longer need my old iPod Touch 4th gen, it went to my dad as an upgrade from his iPod Touch 2G. I preformed a full "restore to factory ...
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