You lose your current pick and go back to Toy Pick
You lose all your upgrades (blacksmith, clicking, gemfinder, idle power)
You lose access to all ore types except poo
The only significant thing you retain from the previous run is the current Gemwaster setting. So, this is the only way to start the game with gemwaster set to 3, 11, 39, etc. gems. That's actually not a bad idea as it greatly improves the quality of your picks! Unfortunately if you ever lower the Gemwaster setting, you can't raise it again until you buy the appropriate upgrade to gemwaster.
The old "total damage/click" value also sticks around, but it doesn't affect gameplay.