Items occasionally vanish when mining, killing, etc that would normally produce an item drop. The item will visually drop instantly, but vanish shortly after.
Video of this on Version 1.0.4
An easy way to replicate this is to run around and break sugar cane, or flowers, or any block with a 100% drop-rate.
A proposed solution is to relog, however this neither makes the item return or the block/animal to reappear.
I have tested this on a private dedicated server as well as the current public one included in the multiplayer list. Players on the public server reported this happening as well.

Still not sure why this was an issue, but haven't had anyone else with the same problem so I'll close it for now

Is it gone for good? Or can you still pick up the invisible item?

From the initial incident, they seem to be completely gone, even after a re-log.
I found that it happens more often when the server is skipping ticks or is low on TPS (I.e. exploring)
Since adding some additional java cleanup arguments on the server end, I haven't seen it happen since.

Is it gone for good? Or can you still pick up the invisible item?

Happened again, rarer now that the server isn't overloaded. The items do vanish, and don't return after a re-log.

That's very odd. I'll look into it.