Itunes has detected an iphone in recovery mode. you must restore this iphone before it can be used with itunes. I received an error message while getting the new update and now my phone just shows the a picture of the usb chord and an arrow pointing to

The only thing you can do is connect to your computer and open iTunes.

Do you have any backup? Backed up to iCloud or iTunes? If so and after restore you can either backup from iCloud or iTunes. Also the media you purchased from iTunes can be downloaded again.

If no backup, then your out of luck.

OK, so I have now plugged the phone into the laptop, and opened I-Tunes. I tunes on my lap top says it has "detected a phone in restore mode" and the only option is to go back to original factory settings.

Nothing I press on the I-phone (a 4G) will move the icon, and I don't want to go back to original factory settins (do I?). Seems as if that will remove all the apps.

You MUST go back to original factory settings.