ITunes is saying there is an issue with the playback (or something like that of my phone) and it's telling me to restore my iPhone. If I restore it, am I going to lose EVERYTHING?
Yes, unless you have a "good" backup in iTunes and/or iCloud. Restoring any iDevice starts by erasing it completely then installing iOS.
Does the phone automatically update at some point? I don't want to lose pictures/videos/apps, etc?
As I stated unless you have a proper backup to restore everything will be lost. You cannot restore an iDevice without erasing everything on it. There is no "automatic update at some point." When the phone is restored iTunes will pop up a dialog asking if you want to restore as New or from a recent backup. If you did not backup first, then your phone will be restored as New.
You can get apps and other iTunes content back after the restore by: Download past purchases
if i restore my iPhone, do i lose EVERYTHING?
