The iTunes activation servers where down for a short period of time, which effected people buying new phones in the stores, and customers upgrading to the new 2.0 software via iTunes.  If you are getting the following error

We could not complete your iTunes store request. An unknown error occurred (-9838)

It is because iTunes is not able to get to the activation to activate your phone.  Your iPhone or iPod Touch will be left in the synching to iTunes state until this is complete.  Keep trying to connect, by switching between iTunes Store and your iPhone or iPod Touch

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