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From my experience (correct me if I am wrong):
Soft reset restarts PocketPC OS, all running applications would be killed ungracefuly (open files not saved).
Soft reset is needed when:
1) Axim is hanging and power off - power on does not help.
2) You have installed a new hardware card and installation program for the driver suggests a reset (actually restart of the operating system).
Hard reset is erasing Axim's "main memory" storage - 64Mb on 400MHz model and restoring just OS files. Though it leaves files on built-in flash card (21Mb) intact. After hard reset you have Axim in the "just-out-of-the-box" state. Owner's information, all settings, your contacts and notes etc. would be erased and you will have to enter it again or restore from backup.
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