It will restore permanent purchases only (not coin purchases). In the case of Virtual Town, that button will restore:

The Irrigation System
Lucky Rabbit's Foot
The Broker

If you wish to start over, and want to keep purchased coins, I suggest you use the "Start Over" feature in the Options. It will remove any coins that were earned in the game, but will keep any unspent purchased coins for the new game. I hope that helps.