How do I recover missing iPhoto albums and pictures?

Question

A week ago, all my iPhoto Albums disappeared that normally would appear in the left iPhoto column under LIBRARY and RECENT. When I opened the iPhoto app from both the Dock and the Applications folder, an iPhoto window opens and asks if I would like to set up my iPhoto Library. The first few times this happened, I ignored the request and tried again with the same results.
I tried unsuccessfully finding and restoring the iPhoto Library Database from my external 3TB Time Machine hard drive. I couldn't find any full iPhoto Library Database backup and my backups go back a year. Instead, all I found and restored are photos and videos that were saved outside of iPhoto on the Desktop and in hard drive folders. Several months ago, there was a similar occurrence, but I was able to restore the Library Database. With no luck this time, I eventually allowed iPhoto to start up as if it was being installed for the first time and I never had the option to load an earlier backup Library Database or choose an automatic restore from an earlier version or backup.
While trying to go through various recovery choices with iPhoto, I started getting iCloud login popups asking for my Apple ID and password. I kept cancelling these because I had not previously set up iCloud. When iCloud messages persisted, I finally used my ID and password and the popups stopped. I'm clueless why this was happening and I remain clueless as to what occurred after I tried many cancellations, then finally entered my ID and password. Since then (two days ago), there has been no evidence of iCloud operating or requiring my attention.
After holding the command+option keys to start the iPhoto app, I've tried all the radio button options, one at a time, to Repair, Rebuild, Recover, Examine with no luck. Instead, all that is found are the same files I already mentioned. When I start iPhoto now after allowing it to start up from scratch, the Library Database shows iPhoto Library Recovered Photos (2 photos), Resources (176 photos), a CD backup, Desktop, and lots of short collections of media, resources, thumbnails, and other graphics images I don't recognize and are probably Invisibles. The only photos that appear when Photos is clicked in the left colum of iPhoto are photos that were apparently imported from backed up desktop and hard drive folders. All the photos that were previously imported to iPhoto and stored in iPhoto albums no longer appear individually or in albums in the left column of iPhoto.
I'm using a one-year old iMac running Mac OS X Version 10.7.5 with iPhoto '11 Version 9.2 (626).
I'm reasonably confident the phtoos and albums are recoverable somewhere, but I'm at a loss to find out where. I've been running Macs since 1984 and this is the first time I have been totally unable to explain or recover from an OS, hardware, or app-level problem.
Any help/ideas would be greatly appreciated. If absolutely necessary, I could pack up all my gear and take it to an Apple office 23 miles away for help.

Answer 1

My problem was not so much the loss of pictures, but the loss of their virtual association into albums I created because the albums were no longer appearing when iPhoto was started. I was reluctant to do any reinstalls of the OS, Tme Machine, or iPhoto because I was confident the existing installs were as they should be. Instead, I explored earlier Time Machine backups of iPhoto-related files and folders. I tried several different files/folders to see what I could find when I restored and opened them. To my delight, I found an earlier "iPhoto Library (original)" that, once I restored it to my desktop, iPhoto automatically found the virtual album-photo associations that existed prior to the earlier loss of albums; the restored albums appea as they should in the left column of iPhoto. This "fix" was not intuitively obvious to me, but I was pleased it worked.
A simple iPhoto explanation through iPhoto Help would have been very helpful if the explanation would have said iPhoto Album and Smart Album photo associations are logical, not physical, and the associations and album names are store in the iPhoto Library folder.
At this point, I'm hesitant to move the restored "iPhoto Library (original)" from the desktop, perhaps to the Applications folder, because I don't want to run the risk of undoing what seems to be working. Should I leave this on the desktop or move it?