The units run Linux as an operating system, similar to your broadband router at home. Like any computer, the odd glitch or software bug can cause freezes and abnormal behavior... hence the magic reset button.
Pushing the button normally does a 'soft reset' leaving settings you have made intact. Some units have a 'hard reset' mode, normally involving holding the reset button in for a given period of time or starting the unit with the button pressed. The latter can cause a reset to factory defaults.
In 99% of cases a single push of the reset button gets everything going again.
I am told by Tom Tom that pressing the reset button totally turns off the device, thereby saving battery power which drains away if you just turn off using the on - off button. They also said it does not affect your settings, as a previous poster has said.
Seems like a good idea if you do not use your Tom Tom everyday
I need to test this yet, I haven't had chance to leave my Tom Tom off for several days to see if it helps preserve battery power.