Yes, I lost everything. I hit the sync button before updating, but still could not recover anything after update. Sync button after update does not seems to recognize any earlier backup.
Pressing SYNC will now restore a backup, you need to select 'Restore from Backup' from the iPhone
Will you lose the music on your Touch as well? This is a pain in the ... , there has to be a better way to go about these updates. I have different Touch/iPad devices with different apps and music. I manually controll my iPods/iPad. Griping isn't gonna solve anything; I'll make a list of what I have on each device. I probably should've done this from the start.
you can actually avoid this if you open itunes from your computer, click on the device/phone, then click apps on the right side. it allowed me to bring back any/all apps that i had avoiding the one-at-a-time business.
the only subsequent annyoance was having to recreate the folder structures, but at least the apps are all back in one shot.
hope this works for everyone with the same problem.
I only had one app disappear.
Nothing else missing.
So I am happy.
I suggest you do a back up,
copy off your photos.
And then update.
You have to eave the device plugged in for quite a while, and things install in stages.
Don't touch it till it has told you it is totally done.
It looks finished, but just leave it till iTunes says it's done.