Restoring the AppleTV is easy.
Simply press and hold the “Menu” and “-” buttons until the white LED blinks in yellow. Use the Apple remote if your universal remote does not support combo commands.
When AppleTV re-starts, it will ask you to select your language of choice followed by 3 options, viz., Restart, Run Diagnostic, and Factory Restore. Pick “Factory Restore” and wait patiently while AppleTV wipes out everything inside and re-install its files to factory condition, putting itself in jail again. Once that completes, you’ll be asked to set up your wireless network and connect to your iTunes.