This problem is very much alive still as of 29/09/14 with iTunes 11.4.0.18 and iOS 8.0.2 running on Windows 7 Pro. The endless nightmare with iTunes with one error after another that goes on literally for years with Apple always beta testing its products through its 'sucker' early adopters!!!
Just got an iPhone 6 and attempted to restore it from my iPhones 5 backup - and of course it failed, probably because the backup was corrupt but iTunes doesn't know this until you try to use it. No way to verify backups or check if a backup will fail because of some corruption on your iPhone or iPad.
So had to abandon restore from backup and start from scratch with installing my many hundreds of apps manually... only for this to keep on failing with this 'unknown error' (to any idiot at Apple that is) for app after app.
Think I half know (nothing new there then) what MAY be causing this. Suspect iTunes no longer tries to install apps from your PC that are no longer available for download but rather than tell you this (iTunes coders couldn't care less) - it gives this spurious 'unknown error' instead.
But again as usual with iTunes you never get one error but several related errors as well that iTunes will not be aware of but still fail with. So if you have queued a number of apps for install and one is now no longer available for download - all following apps (?) will also fail to install with the same 'unknown error' message. As well as this, the app will be left on your iPhone with the helpful 'Waiting' message obscuring the apps name so you can't identify it to try a direct streamed download (which may sometimes works).
And if you are prepared to lose an app (because Apple no longer has it but you do) - when you try to remove the (failed installed) app through iTunes by syncing its removal - iTunes helpfully fails with the 'unknown error' message again and leaves the half installed app on your iPhone. So then tried to delete it from iPhone directly which works but the next time you sync again through iTunes - iTunes attempts to reinstall it (even though you haven't asked it to) and again fails with the 'unknown error' message.
The only workaround I've found for this is to actually remove the app from my PC so iTunes can't see it.
What a f*****g nightmare! I'm rapidly turning into an Apple hater and am seriously thinking of returning my new iPhone 6 and moving over to Android.