How is the factory reset done for a Windows Phone?

For Windows Phone 7 devices, the factory reset is done automatically by the Blancco Mobile Diagnostics and Erasure software when the device is connected. After the factory reset the user is required to start the camera application.

For other Windows Phone devices, the factory reset has to be done manually by the user. the factory reset can be done from device settings or using a button combination.

Please refer to the manufacturer documentation on resetting the device, for example:
http://www.windowsphone.com/en-us/how-to/wp8/settings-and-personalization/reset-my-phone