This happened to me on 07/03/2013. Like the original poster, I too am running OS 5.1.1. I have not synced in 6 months and do not use iCloud - so this issue did not occur because of a sync or have anything to do with iCloud. The only thing I did within the day or so before all the contacts disappeared from my Contacts app is to delete a few unused/unwanted apps and then update a few apps - Facebook and Google Voice were 2 of the ones I'd been avoiding updating for quite a while that I included in my selective app updates in the past week that make me wonder if one of them is the culprit. I noticed Facebook crashing a lot after the app was updated, as well as the FoxNews app (another of the apps I updated this past week). I don't recall Google Voice crashing after its update.
The strangest thing: I think my data is "in there" in the iPod somewhere because when I eliminate all calendars except for the "Contacts' birthdays and events" calendar, I do see some of my Contact's birthdays... and when I click on one of the events - a friend's birthday, under Event Details there is a field that says "Accepted" with "Contacts" beneath it and an arrow... and when I click the arrow it takes me to a screen titled "Invitees" where the word "Contacts" again appears with a green checkmark beside it and another arrow... and when I click that arrow, it brings up a screen titled "Info" which looks like a Contact app entry, except the picture is the default gray person form, the word "Contacts" appears next to the default gray person, and below that is a long string of gibberish next to the field name "Work", which reads in part: 4dhmurjkc5hn8sq0ctp6utbg5pr2sor. It is the same long gibberish character string no matter which event I select for a given Contact in my calendar birthdays. Makes me think the data is there but scrambled or corrupted somehow. Curious if any other users having this issue see the same thing as me, down to the sequence of the gibberish characters? (If the same, maybe would point to a virus or repeatable malfunction of something in the iPod touch??)
Bottom line: short of trying to re-sync from my 6 month old iTunes backup, is there any hope of getting my contacts back?? I have added a lot of info w/in the last 6 months that I know I cannot recreate or get back any other way. Would hate to think it is lost forever.
Apple: are you listening???