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Help Factory reset and purchased apps

I am sure this has been asked before, but I cannot find the definitive answer, so apologies for going over old ground.

My Galaxy S2 is progressively running slower and slower, and now refuses to update apps, stating that there is not enough storage. I have previously fixed this by clearing the log files (*#9900#), but now not event that is enough.

So, I am contemplating a factory reset to clean everything up. My questions then;

1) What happens with all of my purchased apps (purchased through Play Store? How do I get them back?

2) What is the best way to do a factory reset? (what are the options?)

3) Any other suggestions?
 
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