I just updated my iPhone and found that all of my music was missing after the update completed. In fact, this is not the case.
Checking around the web I see that this is a bug in the latest update. The way to cure it is simply to do a sync with iTunes and after the sync everything will re-appear. The music was not ever deleted, it just seems that the iPhone needs to be re-authorized with iTunes.
After I did a sync all my music re-appeared.
This isn’t new; my third-gen iPod Touch has been doing the same thing off and on ever since I got it…
This happened with the previous 4 versions too. A similar problem resulted in photo thumbnails problems and the same solution applied. I haven’t updated yet as I have a 3G iPhone and want to see if this new version fixes the speed problems first 🙂