So I bought a MBP off craigslist and I just want to restore it to factory settings, do I need the former owners password? I am just scared to do something when I don't know what the **** I'm doing.

I have the Mac OS X and the applications DVD. Much help greatly appreciated.
I went to Utilities, clicked on the hard drive to delete, but it doesn't give me any options. Just to delete 'free space' what does that mean?

will everything be good as new? I don't know. I am lost!