Ya, same issue I had...you click the HELP link after that message and it gives you a list of solutions to try.
http://support.apple.com/kb/TS1702
Only one that worked for me was deleting the application from the phone and re-downloading it for free. You lose any scores and such for the games that was stored locally.
The issue I have now is that I cannot get my iphone and iTunes to match the applications correctly. I have apps on my iphone that do not show in iTunes...I have tried transfer purchases, but it doesn't help.
Ugggg...painful