Selling Iphone 3GS, how to restore and deactivate from Itunes

[tdw]

Hi,
I am selling my IPhone 3GS. I understand that to wipe it clean I need to do a restore in Itunes. I assume the phone is linked to my ITunes account, how do I deactivate it?

Does the restore simply do a factory reset?

What is the best way to backup everything and contacts, Backup option and also Outlook for contacts?

I have never been able to use Itunes properly after having the Iphone for a year.

Thanks