I'm having the same problem. I lost all of my contacts thinking that when I synced the iPhone that it would add them to my address book on the computer, but instead it wiped them out even though I directed them to merge the two books together. Fortunately I was able to get the information back on my phone from my Mac mini.
Is this one of the bugs in Lion that I've heard about? I suppose we just need to wait until they fix it.
So I kept looking for another answer and found this answer in another thread:
"It is called "sync" for the reason it not called a transfer. It wants and is designed to "sync" make each other match. If it deleted all on the phone it is because you just had zero contacts in the address book on the computer (which on first sync is considered master copy). If you put one dummy contact into address book on computer then try to sync it will see it needs to "merge" to get the sync process coordinated."
I tried it out and it worked. I originally already had one contact in my address book, but it was me and apparently I don't count as a human being, so I added the dummy contact and it worked after I clicked 'Merge'. Hope it works for you too.