Arg! I was using my iPhone as a modem tonight when iTunes prompted me to update my phone. I chose to download only and not to update. For somes reason, when the download was complete, my iPhone went into restore mode. Since you can't restore your iPhone without the internet, I was stuck between a rock and a hard place. My only option was to use my husband's netbook to restore my phone. That means that I will have to restore to factory setting and lose EVERYTHING on my phone!
Fortunately (debateable) Appled juiced me for $99 this year for mobileme. I'll be able to get all of my contacts back through a wireless sync. Also fortunately (confirmed) I did a hard sync to my laptop today, so I will get all of my stuff back on my phone in a few hours. Still, ARG!
Not a great time for this to happen to me as I am deciding between an iPhone 4 or a Captivate. I am pretty sure that the Captivate is a better long term investment. I will probably give it another 6 months before I decide... Unless this happens to me again.