Dear Stacy,
While seven-year-olds do display some self-consciousness beyond what they might have displayed at a younger age, they tend not to have the kind of anxiety your daughter is experiencing. Generally, when young children develop a fairly acute reaction, it is due to some development in their lives. Has your daughter experienced anything unsettling lately? Have there been changes in the family or elsewhere in her environment?
Don't rule out that she is experiencing some illness. If you haven't already, make an appointment with the pediatrician, to be sure she's OK medically.
Is there any family history of mood or anxiety disorder? If so, she is more vulnerable to developing such a condition than another child would without such a family history. But the onset of such things is not usually acute or dramatic, but more subtle, persistent and enduring.
If the reaction persists, consult with a pediatric mental health clinician to pin down the nature of what is occurring and develop a plan. Be sure to keep your daughter 'in the mix' - i.e., don't encourage her to shrink from her ususal pursuits. If she does, it can develop into a pattern of avoidance. The best way to overcome anxiety is to tackle it head-on, in a loving and supportive, patient atmosphere.
In answer to Bob - I talk to her all the time. She doesn't know why she is feeling this way and obviously can't explain it. I've asked her what frightens her, we have gone through possible things that could happen and how she could deal with them, etc.