Just made one very simple move without having to restore iPhone or reinstall iTunes..
1st step:http://support.apple.com/kb/TS1538 Read 'in my case' in here first before following this link
Follow that link to restart (or if necessary) reinstall your Apple mobile device support.
In my case, Leave iPhone connected all the way. I first exit iTunes. Then i stopped the Apple Mobile device support (by following a part on that link above in step 1) which Effectively made my iPhone undetectable on itunes but discoverable by windows as a 'camera device'. Then while device is still connected, i started the Apple mobile dev support again. Now i open itunes and there my iPhone re-appears.
2nd step: After your iphone re-appears on iTunes, press Sync and all is well...
P.S, Mine is iPhone 4 running on iOS 5, iTunes 10.5, Windows 7..