The carrier update is new data about your service coming from the carrier, not from Apple, but it arrives via iTunes. It will make certain changes to the information in the SM card. Accept (click OK) and it will update and then the warning will go away.
thanks for helping me! I did click ok, and its went away. However, when I connect the phone to computer next time, it ask me again. So, I was wondering if its normal and its any way I can fix this issue. Thanks again!
I have the same problem - I have an iPhone 3GS which I purchased from Orange back in Israel. They (Orange Israel) unlocked it for me when I moved to Finland. Now I live in Helsinki, and have purchased a prepaid DNA SIM Card which I happily use and everything works fine. However every time I put the iPhone back in the dock, iTunes says a carrier update is available. Now If I click UPDATE, it will erase my APN settings (annoying!). However If I Decline the update, everything continues fine, my APN settings are left untouched, iTunes syncs, Unicorns sing, and world peace.. never mind, you get the idea.
But to be honest it's kinda annoying to have to decline the carrier update every time I want to sync or charge my iPhone... Any ideas how to fix this?!
But, there's not much that could help you. Is the Update file being stored at /Users/[Username]/Library/iTunes/iPhone Carrier Support/
Also, you could contact your carrier's customer service and try to find out what the current update should be. It's found at Settings > General > About > Carrier.
Mine is AT&T 5.6 and the file in my Mac's Library is labeled as "ATT_US.ipcc".