This has happened to my daughter's iPod Touch. Wish I'd taken a photo of the screen... disabled for 20+ million minutes. Hah.
Anyway, the answer to this question is all over the Internet tubes.
As Mactech+ says, hooking it back to iTunes and downloading an update will fix it. I don't think it has anything to do with being stolen or messing with the password, and if a guy can't get his answer on iFixit, what's the world coming to?
In this case, the iPod was left aside for a few weeks and it discharged almost completely, though I don't know if that's what triggered it. At this point, I'm suspicious of the crappy no-brand little speaker-dock thing she used to try to bring it back from near-death.
In any case, STILL you need the password to get in. IF Chris was a crook, he'd be locked out anyway.
(Would a crook come to iFixit? iFixit attracts only the BEST people. I suspect all the criminals are over at iHow.)