The "setup as new" means it will set it up as a new device syncing to the computer -- not that it will erase the device.
When connecting an iPad or iPhone to computer iTunes for the first time, you will get the choice to restore from backup or setup as new; the setup as new choice does nothing to the iPhone or iPad (i.e., it does not erase the device -- however another user here in this forum has noted that if any data was previously synced from another computer to the device, that data will be removed from the device.).