How does restrictions work iPod Touch?

You can set them in the General part of Settings. Basically Restrictions remove icons. If you forbid an app in the Restrictions menu its icon will disappear from the Home Screen. If you forbid 17+ apps the Install button will not appear if you are looking at a 17+ app. You can also forbid making changes to Accounts and Location Services which prevents changes to these settings, you have to disable restrictions to change these settings.