But how do you make sure that all your own information is removed from the device before passing it on?
The easiest way is to choose the Erase All Contents and Settings option, which can be found in
Settings -> General -> Reset
(which is the last option of the General set of options).
When you choose this option, you will be removing EVERYTHING from your device, so that it can be set up as a new device by someone else. If you have a passcode, you will need to enter this to proceed with the erasing. If you have set a Restrictions passcode, you will also have to enter this to proceed.
If you have Find My iPhone (or iPad) enabled in iCloud Settings on your device, you will be asked to enter your iCloud account's password in order to disable Find My iPhone.
This is a security precaution introduced in iOS 7, that prevents an unauthorised person from just wiping your phone and re-activating it - they will not be able to re-activate without entering your iCloud password, rendering it useless to them if they don't have this password!