Motorola Droid Hard reset

To reset your phone to factory settings and erase all the data on your phone,
Touch Menu > Settings
> Privacy > Factory data reset > Reset phone.
Warning: All data on your phone will be deleted.

Motorola Droid Hard reset with keys

Power off device.
Press X key on hard keyboard + power button, then release both buttons.

When you see exclamation point press and hold VOLUME UP + CAMERA KEY. You will see Android system recovery menu.
With D pad go to data / factory reset, then press CENTER D Pad, then choose Yes.