Chances are you'll need to reset your Switch at least a few times over the coming years (or you may have had to already), but that's just a basic restart that will mostly be used to deal with the Switch's slight technical hiccups or the occasional system update. A factory reset is a different thing entirely, which will remove all traces of your account and library of games.

Factory resets are less a quick fix, and more a last-ditch effort to fix severe hardware issues. Or a way to wipe the Switch clean if you intend to sell it, trade it in, or give it away. This process will clear out user info, saves, software, and other system memory (via Nintendo). Additionally, anything stored on an installed microSD card will be inaccessible (though not deleted from the card) once the Switch's system memory is wiped. Nintendo Accounts exist outside of the Switch console, so they won't be deleted, but they will be disconnected from the hardware — you'll need to link them again.

In other words, only perform a factory reset if you're prepared to lose everything that's been saved on your Switch. If you do decide you want to go through with it, you'll need to make sure your Switch is connected to the internet (via Nintendo).

Okay, that's not entirely true. You can actually perform a factory reset without deleting all of your data (user information, screen shots, and game saves, specifically), but it will still result in software saved to a microSD card that fails to load. In which case, you'll probably have to delete the games on the SD card and re-download them. This process has to be performed via the Switch's Maintenance Mode.

To perform a full factory reset (i.e. wipe all of your data from the Switch):