What exactly does this do?

It basicly restarts the system. Your Energy recharges and such.

From what I have read, it resets everything, including all of your stats, unlocks, etc. The only thing that stays is your lifetime XP.

I don't know what extra it gives, you though, maybe some different camos? I know you get a medal for it....

oh screw that, not putting my hard earned stats back to zero

I played with a guy that prestiged while we were in his party last night Odyssey, pretty sure all he got was a new weapon camo that was white.