Trying to restore my iPhone and itunes says it's not connected to the internet, but my web browsers work fine

I tried to restore my iPhone 3G and I get a message that I am not connected to the internet but, I can barouse on the internet with my search engins.

It's hard to tell what password you are referring to.  But my guess is you are being asked for the password to the iPhone's backup you created in iTunes.  It sounds like you chose to encrypt the backup.
If that is the case, the following applies:
Warning: Make sure it's a password you will remember or write it down for safekeeping. If you encrypt an iPhone backup in iTunes and forget your password, you can't restore from backup and your data will be unrecoverable.
If you can't remember the password and want to start again, you must perform a full software restore and chooseset up as a new device when iTunes prompts you to select the backup from which to restore.
The above comes from http://support.apple.com/kb/HT4946

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