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Just saw this in the dev centre, question answered:
The syncing infrastructure in iOS 5 is all new and now supports efficient wireless syncing in addition to USB syncing. In iOS 5 Beta 1, wireless syncing is disabled. To sync, or to restore from an iTunes backup, connect your device to your computer with the USB cable, and launch iTunes 10.5 Beta.
 
Aha, there you go. I really can't wait till iOS 5 is released to the public. WIRELESS SYNCING FTW!
 
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