Ok, thanks for the advice.
How do I restore when setting up a new phone?
If I click restore in iTunes it says it says that it will revert to factory settings, but when I shift click restore it asks for a IPSW file.
Thanks,
clicking restore will download the newest available version of the firmware and install it fresh on the phone.
clicking update will do the same, but (in most cases, depending on which firmware it is) will retain all the data on the phone
shift clicking restore is a bit more of an advanced feature (for people like geniuses, devs, and jail breakers)...it allows you to personally select which software bundle (.ipsw) you want the phone to use to update and restore
however, after either restore method, the iPhone has to be set up again in iTunes. When doing this process, one of the questions you are asked is wether you would like to set the phone up as new, or restore from a backup. If restoring from a backup, you will be presented with a drop down box of every backup you have on your computer (for any iOS device, so you could put an iPod touch backup on an iPhone, for example) in a list with dates, with the most recent one defaultly selected. You can choose which backup to use, and then let iTunes work its magic