Super frustrating, but if you get your Trackpad in a wierd setting, it won't pair. The trick is to hold the On button the *entire* time that you are pairing, see below:
How to force a reset on Magic Trackpad: Apple Support Communities
If you hold down the button for on the side of the Magic Trackpad for ~5 seconds, one of two things will happen.
1.) The light will come on and then go off
2.) The light will come on and then blink.
In the case of number 1, you've turned the trackpad off. In the case of number 2, if you continue to hold down the button the light will continue to blink and it will become discoverable in your Bluetooth setup assistant. If you continue to hold down the button through the entire wizard, you should be able to reestablish connectivity.