Is she on-lead when this happens or off?
A lot of dogs feel more threatened if they are approached on-lead, and maybe the fact that you are not moving adds to this feeling....
Or, as you say, it could be guarding-type behaviour. Honey started guarding us when she was about 8 months old - we acted quickly and, while she's not 100% with other dogs, she doesn't guard us anymore (tennis balls, sticks, somewhere she's chosen to rest for a while, she'll guard, but not us!!!).
We stopped taking all treats and toys out on walks, as having them made us more valuable to her (so more reason to protect her source of good things!). We praised any appropriate interaction (however fleeting and from whatever distance) and if she did display any growly/guardy behaviour we just walked away... so she lost the item she was guarding. If she picked up a stick and was guarding that, we took the stick away...
We also took positive action - we started an obedience class, just to help improve her confidence and her bond with us. We also took her along to a doggy socialisation group, where she could learn to be around other dogs in a more controlled environment... we still do this and she is much less anxious with dogs there than she is out and about!

Generally I would try to prevent situations occuring, so don't put her in the position of greeting other dogs when she has something valuable to her. Praise every time she does it right. Show your disapproval when she does guard by walking away from her.
I would be wary of actually taking the item off her, although that's what we did, as it has left us with huge problems getting Honey to retreive anything!!!! And if you weren't 100% certain about how she will react it
could start her guarding the item from you as well as other dogs...