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"Restoring your iPhone or iPod touch
Using the Restore function for your iPhone or iPod touch is part of s"
http://support.apple.com/kb/HT1414
iTunes places the backup files in the following places:
On a Mac: ~/Library/Application Support/MobileSync/Backup/
On Windows XP: \Documents and Settings\(username)\Application Data\Apple Computer\MobileSync\Backup\
On Windows Vista: \Users\(username)\AppData\Roaming\Apple Computer\MobileSync