@jaytkay is probably right that you still have the files, but iTunes doesn’t know where to look for them. It’s a good idea to (1) be aware of where your computer stores your music, and (2) make sure you have iTunes set to NOT sync your iPod automatically (so that you don’t lose music from your iPod if anything goes wrong).
I didn’t look at the links @jaytkay provided, but if you don’t keep your music on an external drive, and you’re using a PC, your music can probably be found in:
Username > My Music > iTunes > iTunes Media > Music
Personally, I store all my music on an external hard drive, and I’ve had problems with iTunes losing my library (i.e., files still on computer, but “not found” by iTunes) a few times. This has happened due to (1) an old glitch that I think no longer exists, which would erase the library if Adobe Acrobat was open at the same time as iTunes and (2) if I removed the external hard drive before quitting iTunes (i.e., iTunes would suddenly decide that all my music should be in the PC iTunes folder. So, I’m pretty careful about both of these things now, and haven’t lost library information in years. It’s good to be a bit cautious if you can figure out how this happened. Re-importing a library, especially if you have a lot of music, can be very tedious.