Nandroid basically dumps all of your important files onto the sd card so that you can install them over whatever you've added after you made the backup.
Example:
I'm running Bugless Beast, but I decide I want to try out UD.
I create a nandroid backup of Bugless Beast and name it BB992 (or whatever)
I then install UD using the nandroid method
I decide I don't like UD and want my BB back.
I perform an advanced nandroid restore and select BB992 to revert to what I had before the install, checking all of the options to restore except recovery.
Now, if you mean a factory reset instead of a nandroid system restore, that's a whole other ballgame...
Let me know if that makes sense/answers your question, or if you have other questions! Sorry it's taken so long for you to get a response. If you've already figured your issue out, I'm glad, but if not, I'll do what I can to help you out!
