There's little chance this is due to a Windows Update which could never hide files even in the worst case failure. Files should always be backed up externally against drive failure.
You may be infected in such a way that your files are hidden so I would work in the boot mode to first see if your files are visible for rescue using
Copy & Paste - in Windows Recovery Console, a Linux boot disk you may have, or
Paragon Rescue Kit Free Edition 11.0 Free.
If so copy them out to quarantine on another drive, flash stick or DVD, to later be scanned using
Malwarebytes, your AV and any solution which turns out to be required for the infection you suffer.
You will have free passage to copy files out in boot mode because any infection is inert while you operate in the boot mode, but active if you boot into the OS.
Next run a full scan with your AV and Malwarebytes, in Safe Mode if necessary. If you have no AV or have a bloated one, install and run a full scan with
Microsoft Security Essentials which is recommended nearly unanimously here.
If you need to move to boot mode to do these because infection is blocking solutions, follow the steps in
Troubleshooting Windows 7 Failure to Start until you can function from the desktop.
Because the only time I've seen files disappear like this is with the Hidden Files infection, I would then proceed with the solutions applied here which worked for me in several of these cases to disinfect and then unhide the files:
http://www.sevenforums.com/system-security/221572-fake-av-infection-files-hidden.html
Once you get a hit on what the infection actually is, post it up to our Security forum for more customized solutions. Keep in mind that once you get your files, in a heavily infected system it is almost always better to do a
Clean Reinstall - Factory OEM Windows 7 which steps are the same for retail and will get and keep a perfect install. Be sure to delete all partitions. If you want to first try Factory Recovery then afterwards
Clean Up Factory Bloatware.
