Enabling hidden folders brings up a new folder: iPod_Control. Inside this folder is another named Device, and inside this is a file named _locked. Open up this file in Notepad to find a series of symbols - an encrypted password.
Delete the file and the iPod is unlocked. The fix depends on the type of iPod, but the following steps should be universal.
1) First rename the _locked file to _unlocked. Disconnect the iPod and reset it.
2) If that doesn't solve the problem, delete all text inside the file. Save it, disconnect the iPod and reset it.
3) If that does not work, delete the file, disconnect the iPod and reset it.
This is not an Apple-sanctioned remedy, so use caution. And back up any files before altering or deleting.