I encountered the same "Unknown" error during my update to 1.1.3.
The iPhone does not have enough free space to perform the update.
For those encountering this error during a sync that is not related to an update, you'll have to check and see if your issue is related to free space.
For me, the solution was:
1) Choose to NOT sync content on the Music, Photos, Podcasts, and Video tabs. Click Apply.
2) The iPhone should sync to a mostly empty state
3) Click the Update button on the Summary tab
4) At the conclusion of the update, re-select content on the Music, Photos, Podcasts, and Video tabs. Click Sync.
-Brian