There are numerous articles on the Internet giving instructions on how to "hard" or "soft" reset your Motorola Droid. Most of these instructions are contradictory; consequently, there is no way to verify that the steps you take would not further damage your Droid. Rather than take the chance, Motorola suggests two ways of resetting your Droid if you are having problems with it: crash recovery and factory reset.
Crash Recovery Reset
Turn your Motorola Droid over and place it on a stable surface with a soft cloth underneath it to protect the screen
Remove your Motorola Droid's back cover to reveal the phone's battery.
Remove the battery and leave it out of the phone for a moment or two.
Replace the Droid's battery in the exact manner you found it, ensuring the contacts are correctly connected.
Replace your Droid's back cover and turn your phone back on.
Factory Setting Reset
Back up your Droid's data onto an external source, such as a computer, if your phone is operational.
Hit your Droid's "Menu" key and tap the "Settings" option.
Tap "Privacy," "Factory Data Reset," and then tap the "Reset phone" option to restore your Droid to its default factory settings.
Allow the Droid to reset itself and then reload all your backed up data, unless you suspect a downloaded application was causing problems with your Droid.