There are great step-by-steps here in the forum how to do a factory reset. It's very simple.
How-To: Hard Reset your Motorola Droid
Manual Reset Instructions
There are apps to back up your data/applications/settings (ie MyBackupPro)
... as a factory reset will 'wipe' your phone clean (like it came out of the box) and a back up app can save you the hassle of having to download all your apps again manually.

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:: You sure did! I don't know why I didn't notice them the first time. Reading too fast in hyper scared/worried mode I guess. My apologies!
