It's fairly common for iPod owners to have to restore their device to its factory settings because of issues with it. This is an update for the Apple iPod Shuffle Reset Utility and it will only work with iPod Shuffle of the 1st and 2nd Generation.
Essentially what it does is reformat your iPod Shuffle, erasing all the content that was stored in it, including the files that might be causing your problem in the first place. The utility is very simple to use and shouldn't take too much time in fixing your iPod Shuffle. It can also be seen as a close-to-last resort after unsuccessfully trying to restore your iPod from iTunes and before actually returning it to Apple Customer Support to get it fixed.
Apple suggest using the utility when your iPod can not play music, has stopped being recognized by iTunes or is identified as either a device in "Recovery Mode" or a "USB DFU Device".
If you're having issues with either a 1st or 2nd generation iPod Shuffle than this utility should work a charm to restore it to its factory settings.
