I bought a new ipod touch to replace my old one that did not have icloud.  How do I erase my old ipod?

I just purchased a new ipod touch to replace my old ipod touch.  The reason I bought a new one is I wanted one that had the icloud that I could sync to my ipad and iphone.  I am going to give my old one to my husband.  I plugged my new ipod touch into my computer and put my musice library on it.  I then tried to clear my old ipod touch.  I went to General Settings and told it that I wanted to clear the ipod touch.  It went thru a few things and then it said to plug it into itunes.  I do not understand why?  On my itunes it does not list two ipod touch's on there as devices, so I am scared it I plug the new one into itunes it will clear both.  Please help!

Yeah, what planb77 said. 
Just connect your iPod to your computer, let iTunes come up, and then select Restore to Factory Settings.  This will clear off every thing and install the current version of iOS for that generation.  You can name the device and then set up iTunes to synch the items you choose.
If you have more than one computer, let hubby set up his own iTunes account and Apple ID so you don't get your stuff mixed up.

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