The same thing happened to us, Spice.
We were ranked on the first page for most European countries when searches for Italian hotels, German hotels, etc. were conducted and suddenly all of them fell off the radar.
We also lost ranking for our Irish counties, all of which were on the first or second page and now have suffered.
At the same time we began bouncing back and forth from a PR4 to a PR5 (I know
PR is a joke so no cards and letters, please).
Ironically, none of our Irish villages and towns lost ground which probably means very little.
Within a couple of days we noticed our pages were regaining some strength but, as of yet, they haven't fully recovered.
I suspect it is as Visio suggests and Google is going through yet another skin shedding episode.
Doncha get tired of dancing on the strings sometimes?