What happened to Sydneys memory in Season Three?
Apparently after the fight with the Evil Francie (in the Season Two Finale) Sydney was captured by The Covenant. She was subjected to extreme torture; after she escaped from them, she underwent an experimental procedure to have the memory of the last two years erased. However, when she later returned to the CIA, she tried hard to regain those memories. Ultimately, it was Kendall who told her what happened; she had confided in him after her escape from The Covenant, and she had asked him not to tell her the truth, if the memory-erasing procedure worked. Read more about it in the season three recap.