It restores the phone back to original factory settings...but with the current OS. All Play Store apps, files, music, settings, etc. on the internal storage will be erased. All pre loaded apps will revert to their original version and will need to he updated again. It will not affect any files in the SDCard. You can perform one from All Settings > Backup & Restore or from the Recovery Menu. You would want to backup all files, texts, pics, etc. that are on internal storage to a PC, SD card or cloud storage. It can take a while to set everything up again, but its like a fresh new phone. Hope that helps.