The error occurs when I update versions of Minecraft. I.E. I have just updated from 1.4.5 to 1.4.6 but this has also previously occurred at other updates.
I had to just pick version 1.4.6 in the box above but this has happened at every version update I have had.

Basically what happens is any items I have disappear and I have to start from scratch. This includes everything in the inventory, the hot bar, armour/ wearable items and experience levels.
This hasn't been much of an issue previously as I was just starting out but this time I have lost a full set of enchanted armour and a full set of enchanted diamond tools. Whilst not the end of the world it is still very annoying.