This is typical---Here is the Apple Support fix.
1. Make sure you have updated Lion
2. Go to Apple Download and get Itunes 10.45
3. Install 10.45 on your computer
3. Restart Computer
4. Open Itunes
5. Insert cable from your Iphone to the computer
6. Allow the restore to take place.
This worked for me but will take some time depending on how much data to synch.
Initially I downloaded iOS5, but found when it couldn't continue because it couldn't back up all my music, I simply deleted the music. When it began to restore again, it seemed corrupt and phone was bricked for an hour solid.
I was able to fully restore. It took over 3 hours of WORK, but it did happen. Several times the process got locked up in the restore. I finally would get frustrated and reboot my PC and disconnect the iPhone, then reconnect and restart the restore.
It finally accepted the restore, then SLOWLY restored all my apps. Then after it was all good, I went back and put all my music back on.
So my best word of advice is to keep at it. If it seems to hang, disconnect and retry. Not very technical, but worked for me!
I had the same problem for 2 days - found the solution on another thread.
Note: this solution is only for Windows machines - it says Windows 7 but also works for XP. Hope this helps!