Which iPod do you have? If you are not sure or do not remember, this guide may help you:

http://docs.info.apple.com/article.html?artnum=61688

I found mine is a 5th generation 30GB iPod. I bought it on September 2006, but it's not one of the new models they released that month.

The thing is suddently it has stopped working. iTunes finds it and it says it has to be restored. When I tryed to restore it, iTunes asked me if I wanted to install the new 1.2.3 firmware version and I say, why not?

Well, the restoring process seemed to be ok, but when the iPod was restarting it came back to the same screen of death:

"Connect to your computer. Use iTunes to restore."

So I tried to restore it a couple of times but the result was the same :( I'm looking on Internet right now, but I can't find any clues. I'll get it to the Apple store after work to see if it can be fixed or not.

Update

After going to the Apple store today, it is confirmed. My iPod is dead. Apparently is the hard drive what has gone kaput. I'm taking a look at iFixit and it loos like it owuld cost $120 for a new HDD.

At the Apple store I can switch my broken iPod for another one, same model, for $160. I don't know. Too mucho dinero!