Edit: The Padlock is the screen lock, touch the lock symbol and swipe it to the side to unlock the screen. This feature can be turned off in settings, if you prefer to not have it.
To reset your Nexus 7 to factory settings, please follow these steps:
Note: By performing a factory data reset, all data will be wiped from the device. While any data stored in your Google Account will be restored, all apps and their associated data will be uninstalled.
Go to Settings > Backup & reset
Touch Factory data reset
Touch Reset tablet
If your tablet is password protected, you'll be prompted to enter your Pattern, PIN, or Password
Touch Erase everything to confirm
If you are unable to access the settings menu of your device, you can still reset your phone by performing a Hard Reset. Here are the instructions:
If your tablet is on, power it off.
Press and hold Volume Up + Volume Down + Power until the device powers on.
You should see an image of an Android lying on its back.
Press Volume Down twice, until the screen says "Recovery mode."
Press Power to restart into "Recovery mode."
You should see an image of an Android with a Red triangle after a few minutes.
While holding down Power, tap Volume Up
Use the volume keys to scroll to "wipe data/factory reset" and press Power to select it
Scroll down to "Yes - erase all user data" and press Power to select it
Note: If at any point during the above steps your tablet becomes unresponsive, you can restart it by holding down the power button for several seconds.