Apple has recovered the prototype for the next generation iPhone, which apparently caused a sensation when it fell into the hands of an editor at Gizmodo, a tech Web site owned by Gawker Media.

A hapless Apple engineer lost it in a bar on March 18 and yesterday an Apple lawyer drove to the home of Gizmodo Editor Jason Chen in Fremont, Calif., for the handover of the device.

Nick Denton, CEO of Gawker Media, the parent of Gizmodo, described the handoff as an “almost entirely silent exchange.”

The loss over a month ago and its subsequent falling into the hands of Gizmodo, which publicized its find, was a huge embarrassment for the super secret Apple and its CEO, Steve Jobs.

Gizmodo apparently paid $5,000 to the person who recovered the prototype of the Apple iPhone 4G in a Redwood City, Calif., German ale house, Gourment Haus Staudt, where it had apparently been left behind by Apple engineer Gary Powell.

Gizmodo said it had been disguised to look like the current generation iPhone but when the device was taken apart, the Gizmodo folks realized it was something new and different.

“Bruce Sewell, the [Apple} general counsel drove round himself to Jason Chen’s house in Freemont,” said Denton. “I assume he did not want to be quoted.”

The new model was not expected to be released to the general market for two more months.

After Gizmodo broke the story, Sewell had sent a letter to the Web site asking for the return of their property.

There was some early speculation that Gawker and Gizmodo might have been in receipt of stolen property, but many are now dismissing such claims as Apple apparently never accussed Gizmodo of theft.

“The only formal commmunication we’ve had from Apple in the letters asking for the phone back,” said Denton.

He said the three stories — the scoop on the phone, the identity of Powell and the Apple letter generated about 8 million unique visitors to the Gizmodo site, said Denton.