A Soft Reset is the act of rebooting or restarting your device in order to clear its internal (non-storage) memory of running programs. This is a way to start afresh if an application is causing problems and is normally only used on smartphones.
Windows Mobile smartphones usually have a dedicated soft reset pinhole that can only be pressed with a sharp, pointed object such as a stylus. It's designed to perform a soft reset when the device becomes unresponsive.