How to restore a 2nd or 3rd Gen Apple TV with flashing light
I recently updated my 3rd generation Apple TV to the latest software update. Like all earlier updates the software update began and with about one minute left I left the room for a few minutes and came back to find problems. I had no audio output and no video output on my screen. The light on the Apple TV was flashing at a quick pace.
If you have problems with your Apple TV but are still able to view video you have an easy option which includes going to the settings menu, choosing general, and selecting Reset. At that time you can click Restore. Although your AppleTV will install the latest Apple TV software update keep it mind that it will restore itself to the factory settings. This means it'll be just like when you first purchased it and you will lose all settings.
Assuming that you are unable to view video such as in my case other measures must be taken. Like with many electronic components I unplugged all cables including the power cable for 30 minutes and reconnected. In some cases that may help but in my case it didn't. That's when I had to do a restore using iTunes.
First, the Apple TV has a Micro USB port. This is on the back of the unit just above the HDMI port. In some cases if you have a cable plugged in you may not see the Micro USB port since it may be covered by the HDMI cable. To do this procedure you will need a USB to Micro USB cable. First you must disconnect the HDMI and Power Cable from the Apple TV. Then you connect the Micro USB cable to the back of your Apple TV and the other end to a USB port on your computer. You can then reconnect the power plug. It is important that the Apple TV is connected to the Micro USB cable while the power is disconnected from the Apple TV. At this time the Apple TV should show up in the iTunes device list. At this time you can open iTunes on your computer. If you don't have iTunes on your computer it's a free download here. You can then select Apple TV in the device list and click Restore. The process will take awhile and don't remove any cables until the process is done. Remember also that with this Restore option your Apple TV will be updated to the latest software version but also will be restored to factory settings so you will lose all settings and it'll be like when you first purchased it. In most cases once reconnected to your television you should have a working Apple TV.
If for any reason the above does not work a visit to the Apple Genius Bar is likely your only option.