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We upgraded the characters at the fairy in Skylanders for the xbox. When we logged back in, under the right profile, all saves were gone.

has this happened anyone else?

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I don't think the issue is with the character upgrades, I've seen some people have issues with the game saves on the xbox 360, see the question here gaming.stackexchange.com/questions/44040/… – JohnoBoy Jan 12 '12 at 20:01
    
I had all my Skylanders game saves disappear also on the XBOX 360. I started the game with the portal not plugged in. Maybe that did it. – user18323 Jan 15 '12 at 1:16

I don't think you can change it or bring them back, but this has happened to me on trap team for iOS after beating the game, still haven't gotten around to finishing again :(

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