What's more, it'll try to redownload all your apps over 3G which can eat up a LOT of your data allowance. Make sure you have a quick access WiFi point (ie. unencrypted) available, and switch to it quickly as soon as you have the chance. It will let you know you should connect to wifi, but will then pop up with a number of notices in an attempt to block you, just cancel all those dialogues as quickly as you can and get that WiFi up or your 3G provider will get a big bonus. Once the apps have downloaded, you can encrypt your WiFi again.
Oh, and all photos and data on your phone will not be lost so long as it's stored on the SD card. If it is in internal flash, it will be wiped.