The phone prompted me to enter my google credentials, and guess what? I entered them only to see it reject it by saying that it was an incorrect username or password.
I kept looking in many forums and found no success even after 10 long hours of searching.
I decided to GIVE MY PHONE A CALL from my house number. ACCEPTED IT and pressed the "Settings" button and there shows the Contacts, Sim Tools etc. I pressed the contact button only to see the dreaded locked screen again.
But since that was enough to give me hope, I GAVE MYSELF A CALL AGAIN and pressed the settings button again. Only this time I was able to enter into the Contacts menu. I pressed the Home button and was so glad I was able to ENTER MY HOME SCREEN!. I pressed and went to settings---> accounts and sync--->quickly synced my gmail and deleted all other accounts. I locked my phone again by pressing the power button. I ENTERED MY GOOGLE CREDENTIALS AGAIN and THIS TIME IT WORKED!!!
I was so glad that I had recovered my phone WITHOUT ANY DATA LOSS!
I hope this helps many who are suffering from this glaring android bug that is so frustrating.
BTW. I AM USING SAMSUNG VIBRANT with official firmware.