What do i do when my ipod is disabled and says connect to itunes and itunes tells me that it cant connect?

Place the iOS device in Recovery Mode and then connect to your computer and restore via iTunes. The iPod will be erased.

iOS: Wrong passcode results in red disabled screen                          

If recovery mode does not work try DFU mode.                         

How to put iPod touch / iPhone into DFU mode « Karthik's scribblings         

For how to restore:

iTunes: Restoring iOS software

To restore from backup see:

iOS: How to back up

If you restore from iCloud backup the apps will be automatically downloaded. If you restore from iTunes backup the apps and music have to be in the iTunes library since synced media like apps and music are not included in the backup of the iOS device that iTunes makes.

You can redownload iTunes purchases by:

Downloading past purchases from the App Store, iBookstore, and iTunes Store

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