How can I delete all content from an iPod?

Long story short, a former "friend" owed me some money and gave me their iPod (new purple nano) as repayment. I have my own iPod and have no use for it, so I want to sell it at a pawn-type store. However, this person has become extremely sketchy and I want to make sure there's no way she can come back and say I stole it from her or something ridiculous like that, so I want to delete all the content and registration info off the iPod if possible. Is there a way to do this before I sell it?